MRKM 61: Predictive Analytics Model

Linear Regression

Linear regression attempts to model

the relationship between two variables
by fitting a linear equation to observed

One variable is considered to be an

data.
explanatory variable, and the other is
considered to be a dependent variable.

Ascatterplotcan be a helpful tool in

determining the strength of the relationship
between two variables.
A valuable numerical measure of association
between two variables is thecorrelation
coefficient, which is a value between -1 and
1 indicating the strength of the association of
the observed data for the two variables.

LEAST SQUARE METHOD

This method calculates the bestfitting line for the observed data by
minimizing the sum of the squares of
the vertical deviations from each
data point to the line.

 Outliers : a point which lies far from

the regression line. It represent
erroneous data.
Influential Observation: a point
lies far from the other data in the
horizontal direction

Example:
X

R square (R )
2

Tells us how well the regression line predicts actual

values.
1. Take the actual values
2. Take the mean of actual values
3. Look the distance from actual value to the mean
4. Draw the regression line, come up w/ estimate
values.
5. Take the distance of estimated value to the mean
6. Compare the distance of actual mean with
distance of estimated mean.

DONE WITH LINEAR REGRESSION

QUESTIONS?