Question

An analyst for a very large retail chain wishes to know which variables impact daily sales. Independent variables that are considered include daily average temperature, precipitation amount, traffic data (if there was construction, if the roads are icy, etc.), day of the week, if it is a holiday season, location (outdoor strip mall, stand-alone store, small indoor mall, large indoor mall), population density in the 15 mile radius from the store, and many other factors. The analyst used a computer software program to select the “best” model, and the resulting model did not include daily average temperature. True or False: The analyst can conclude that daily average temperature is not correlated with sales.

Answer 1

The products that are sold in the retail store have to be known because some product sales vary with temperatures like ice-cream, soft drinks, or cafes. As we don't know which type of retail store it is or the products it is selling we should not give a judgment.

There are instances where we might get the best model but it may be giving us a spurious relationship like the GDP of a country is ignoring inflation and exchange rate of that country rather than having a correlation with the amount of precipitation of another country which is meaningless.

So if the products are not temperature sensitive then we may definitely go with the model but if they are then this model should be rejected.

As the analyst is of that retail chain only so I hope he must be aware of the products hence hen can can conclude that daily average temperature is not correlated with sales.