Interpretation of Regression Results
Brodie Company’s advertising manager wants to know whether the company’s advertising program is successful. The manager used a spreadsheet program to estimate the relation between advertising expenditures (the independent variable) and sales dollars. Monthly data for the past two years were entered into the program. The regression results indicated the following relation:
Sales dollars = $169,000 ($200 × Advertising expenditures)
Correlation coefficient = .864
These results seemed to imply that advertising was reducing sales. The manager was about to conclude that statistical methods were so much nonsense when you walked into the room.
Required
Help the manager. What might cause the negative relationship between advertising expenditures and sales?