8egresslon Analysls

JaL ls 8egresslon
8egresslon analysls ls a sLaLlsLlcal Lool for Le
lnvesLlgaLlon of relaLlonslps beLween
varlables
usually Le lnvesLlgaLor seeks Lo ascerLaln Le
causal effecL of one varlable upon anoLer
Lg1e effecL of a prlce lncrease upon demand
Lg 1e effecL of canges ln Le money supply
upon Le lnflaLlon raLe
9urpose
8egresslon analysls ls used Lo predlcL Le value
of one varlable (Le dependenL varlable) on Le
basls of oLer varlables (Le lndependenL
varlables)le Canges ln x responslble for
canges ln ?
? Mx + C
uependenL varlable denoLed
lndependenL varlables denoLed

2
1ypes Cf Models
1o creaLe a probablllsLlc model we sLarL wlL a deLermlnlsLlc
model LaL approxlmaLes Le relaLlonslp we wanL Lo model and
add a random Lerm LaL measures Le error of Le deLermlnlsLlc
componenL
1) 9robablllsLlc Model
2) ueLermlnlsLlc Model
Determ|n|st|c Mode|
An equaLlon or seL of equaLlons LaL allow us Lo fully
deLermlne Le value of Le dependenL varlable from Le
values of Le lndependenL varlables
LgueLermlnlsLlc Model ? M(x) + C
1e cosL of bulldlng a new ouse ls abouL 8s/100 per
square fooL and mosL loLs sell for abouL 8s 100000
Pence Le approxlmaLe selllng prlce (y) would be
y = 100,000 + (100)(x)
(were ls Le slze of Le ouse ln square feeL)
9robab|||st|c Mode|
y 100000 + 100x + r
1e Creek leLLer epsllon ls Le random Lerm (le
error varlable) lL ls Le dlfference beLween Le
acLual selllng prlce and Le esLlmaLed prlce
based on Le slze of Le ouse lLs value wlll vary
from ouse sale Lo ouse sale even lf Le
square fooLage (le x) remalns Le same
? a + bx + bx + bxn + r
|mp|e L|near kegress|on Mode|
A sLralgL llne model wlL one lndependenL varlable
ls called a flrsL order llnear model or a slmple llnear
regresslon model
lLs ls wrlLLen as
1e 9rocess
SLep 1 SelecL and exLracL your daLa
SLep 2Make a scaLLer ploL
SLep 3 8egresslon Analysls
SLep 4 Make concluslons dependlng on Le
CoffeclenL of regresslon le (lnLerpreLaLlon)
SLep 1 SelecL Le uaLa
Year SaIes GDP
2007 100 1.00%
2008 250 1.90%
2009 275 2.40%
2010 200 2.60%
2011 300 2.90%
SLep2 ScaLLer 9loL
8,815.55234.584
#0.688
50
100
150
200
250
300
350
1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 2.20% 2.40% 2.60% 2.80% 3.00%
S
a
l
e
s
GDP
SLep 3 8egresslon Analysls
8egresslon SLaLlsLlcs CoffeclenLs
MulLlple 8 0829224 lnLercepL 3438409
8 Square 0687613 Cu9 8813332
Ad[usLed 8 Square 0383484
SLandard Lrror 3102181
CbservaLlons 3
nterpretat|on
1e 8squared number ln Lls example ls 687
Lls sows ow well our model predlcLs or
forecasLs Le fuLure sales
nexL we ave an lnLercepL of 3438 wlc Lells us
LaL lf Le cange ln Cu9 was forecasLed Lo be
zero our sales would be abouL 33 unlLs
1e Cu9 correlaLlon coefflclenL of 8813 Lells us
LaL lf Cu9 lncreases by 1 sales wlll llkely go up
by abouL 88 unlLs