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A Multivariate Analysis Approach to Diamonds’ Pricing Using Dummy Variables in SPSS

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Computational Science and Its Applications – ICCSA 2021 (ICCSA 2021)

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Abstract

In the present article, a distinctive methodology to predict the price of diamonds is proposed. To do so, a vast dataset was used encompassing empirical data relative to variables commonly used to assess the commercial value of diamonds. The selected dataset was retrieved from the Kaggle website [1] and includes diamonds’ physical properties along with their respective price. Therefore, a data analysis based on Analysis of Variance (ANOVA) was conducted to study the diamonds’ characteristics that determine their prices. It was found that the weight of the diamond (carat) has an impact on diamonds’ price. For this reason, diamonds’ price per carat was considered as a new dependent variable. Moreover, the variables diamonds’ clarity and the width of the top of the diamond (table) affect the dependent variable. After applying the stepwise regression methods, it was found that the variables related to the width of the largest section of the diamond (Y), and table were the least significant ones. Moreover, both backward and forward selection led to the same result in terms of the predictive model. All the residuals’ assumptions were validated. The adjusted coefficient of determination was \(88.3\%\). Since multicollinearity effects can exist between the independent variables, Principal Components Analysis (PCA) can be used, as future work, to eliminate these effects.

This work has been supported by FCT - Fundação para a Ciência e Tecnologia within the R&D Units Project Scope: UIDB/00319/2020.

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Authors and Affiliations

  1. ALGORITMI Center, University of Minho, 4710-057, Braga, Portugal

    Ana Rita Antunes, Ana Cristina Braga & Lino A. Costa

  2. DTx Digital Transformation CoLab, University of Minho, 4800-058, Guimarães, Portugal

    Cláudia Buga Buga

  3. Center for Micro-Electro Mechanical Systems (CMEMS), University of Minho, 4800-058, Guimarães, Portugal

    Daniel Coutinho Costa & José Grilo

Authors
  1. Ana Rita Antunes
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  2. Cláudia Buga Buga
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  4. José Grilo
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  5. Ana Cristina Braga
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Correspondence to Ana Rita Antunes .

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Editors and Affiliations

  1. University of Perugia, Perugia, Italy

    Osvaldo Gervasi

  2. University of Basilicata, Potenza, Potenza, Italy

    Beniamino Murgante

  3. Covenant University, Ota, Nigeria

    Sanjay Misra

  4. University of Cagliari, Cagliari, Italy

    Chiara Garau

  5. University of Cagliari, Cagliari, Italy

    Ivan Blečić

  6. Monash University, Clayton, VIC, Australia

    David Taniar

  7. Kyushu Sangyo University, Fukuoka, Japan

    Bernady O. Apduhan

  8. University of Minho, Braga, Portugal

    Ana Maria A. C. Rocha

  9. Polytechnic University of Bari, Bari, Italy

    Eufemia Tarantino

  10. Polytechnic University of Bari, Bari, Italy

    Carmelo Maria Torre

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Antunes, A.R., Buga, C.B., Costa, D.C., Grilo, J., Braga, A.C., Costa, L.A. (2021). A Multivariate Analysis Approach to Diamonds’ Pricing Using Dummy Variables in SPSS. In: Gervasi, O., et al. Computational Science and Its Applications – ICCSA 2021. ICCSA 2021. Lecture Notes in Computer Science(), vol 12952. Springer, Cham. https://doi.org/10.1007/978-3-030-86973-1_43

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  • DOI: https://doi.org/10.1007/978-3-030-86973-1_43

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