ABSTRACT
MBAPAYi = 679.83 + 146.12AVGMATi - 489.53ACRATEi + ei (0.01) (2.08) (-3.30) SER = 6383.53 R2 = 0.66 n = 46 With this regression in hand we can make a forecast of the average salary of newly minted MBAs from Harvard if we have the average GMAT score for this particular class (AVGMAT = 708) and the acceptance rate (ACRATE = 11). The model predicts that the average starting salary for MBAs out of this class at Harvard is: FORE(MBAPAYi) = 679.83 + 146.12AVGMATi - 489.53ACRATEi
FORE(MBAPAYHarvard) = 679.83 + 146.12 (708) + - 489.53 (11) = $98,454 It turns out this forecast is low since actual average starting salary for this MBA
class at Harvard was $105,896. The forecast error is: ei = Yi - iYˆ $7,442 = $105,896 - $98,454 A couple of things to know about this forecast:
1) This is a “point” forecast since it is a specific value as opposed to a range of values. 2) This is an “out-of-sample” forecast because the data from Harvard were not used to estimate the structural parameters of the model.
