Regression Analysis

Dr. Kartikeya Bolar

Problem at hand
Data About Data
Salary is the dependent variable Years of Experience , Gender and Interaction(Years of Experience * Gender) are independent variables Gender is a dummy variable Gender = 1 indicates male Gender = 0 indicates female

Using Regression Analysis

Drag the variables to the appropriate tasks

Drag the variables to the appropriate tasks

Model tab of Linear Regression

Model Selection Method Information of Model When we are planning to use regression for prediction purpose, without bothering about the significant contribution, one can go for full model selection( that is the model will include all the independent variables).

Model Statistics
Statistics Standardized regression coefficients/standardized estimates for comparing the influence of independent variables Tolerance and Variance Inflation values for diagnosing multicollinearity

Predictions and Residuals

Results and Interpretation

Results

Interpretation
Model DF refers to 3 independent variables Corrected Total DF refers to sample size -1 (10-1) F Value indicates the ratio of explained and unexplained mean variances. Higher the value better is the explanation by the model hence better model fit. Pr> F indicates the p-value , Here this is used for checking the overall significance of the model. Ho : The model is insignificant . Ha : The model is significant. If p-value is less than level of significance, then reject Ho. Since p-value <0.05 (level of significance is 5%) hence there is enough evidence to reject Ho. Hence it is concluded that the model is significant R_Square = 0.9791 indicates that 97.91% of the changes(variance) in the dependent variable is explained by the independent variables used in the linear model(equation). R-Square is also called coefficient of determination. Root MSE = square root of Mean Square Error . Here Root MSE = square root(0.53030) = 0.72822. Lesser the value of Root MSE , better is the model fit. This is also called Standard Error of the Estimate. Adjusted R_sq = 1- { (1- R_Square) * (Corrected Total DF)/Error DF)} = 1- { (1-0.9791)*(9/6) } =0.9687 Adjusted R_sq may fall if the added independent variables have little explanatory power or if the degrees of freedom become too small.

Results and Interpretation

Results Interpretation
Estimated equation is Salary cap = 0 + 3 *(Years of Experience )+ 0.27273*(Gender) -0.95455*(Interaction) For females , Salary cap = 3* (Years of Experience) For males , Salary cap = (3-0.95455)* Years of Experience + 0.27273 = 2.04545 * Years of Experience + 0.27273 (Got by replacing value 1 for Gender in case of male and 0 in case of female). Note : Interaction = Gender * Years of Experience Pr>|t| indicates the p-values which suggest that Years of Experience and Interaction are significant predictors at 5% significance level. Since Gender is not a significant variable however it is significant in the interaction term, it can be concluded that Gender is a pure moderator. Among the significant predictors, Years of Experience has more influence on Salary as the standardized estimate corresponding to Years of experience is greater than Interaction in magnitude. Since the tolerance value for all independent variables is greater than 0.1 and Variance Inflation is less than 10 , there is no significant evidence of multicollinearity.

Results and Interpretation

Results Interpretation The distribution of the residuals should nearly follow normality indicating the normality of the error term distribution

Results and Interpretation

Results Interpretation
If the plot of studentized residuals against predicted values do not form a diamond shape pattern like the case here, then constant variance of the error term assumption is satisfied. If the plotted points dont take a shape of curves like the case here, then the linearity assumption is also satisfied. If the plotted points do not form any pattern on either side of the y-axis as the case here, Independence of the error terms assumption is also satisfied.