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Module 1 Lesson 5

The document discusses linear regression for business statistics. It explains that regression analysis has errors, known as residuals, and introduces R-squared as a measure of goodness of fit. A higher R-squared indicates more of the variation in the Y variable is explained by the regression model. The document also discusses reasons why errors exist in regression models, such as omitted variables or an incorrect functional form.

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58 views

Module 1 Lesson 5

The document discusses linear regression for business statistics. It explains that regression analysis has errors, known as residuals, and introduces R-squared as a measure of goodness of fit. A higher R-squared indicates more of the variation in the Y variable is explained by the regression model. The document also discusses reasons why errors exist in regression models, such as omitted variables or an incorrect functional form.

Uploaded by

andri00
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Linear Regression for Business Statistics

Regression is a process that has errors


Linear Regression for Business Statistics

Regression is a process that has errors


Linear Regression for Business Statistics

Regression is a process that has errors


Linear Regression for Business Statistics

Regression is a process that has errors


Linear Regression for Business Statistics

Regression is a process that has errors


Linear Regression for Business Statistics

Regression is a process that has errors


Linear Regression for Business Statistics

Regression is a process that has errors


Linear Regression for Business Statistics
Linear Regression for Business Statistics
Linear Regression for Business Statistics
Linear Regression for Business Statistics
Linear Regression for Business Statistics

Larger residuals ⇒ “bad” fit


Smaller residuals ⇒ “good” fit
Linear Regression for Business Statistics

R-square
[ A “goodness of fit” measure ]
Linear Regression for Business Statistics

R-square
[ A “goodness of fit” measure ]

 Varies from 0 through 1.


 Proportion of variation in the Y variable explained by the
regression model.
 Values closer to 1 indicate a good fit.
Linear Regression for Business Statistics

R-square
[ A “goodness of fit” measure ]

 Varies from 0 through 1.


 Proportion of variation in the Y variable explained by the
regression model.
 Values closer to 1 indicate a good fit.
Linear Regression for Business Statistics

R-square
[ A “goodness of fit” measure ]

 Varies from 0 through 1.


 Proportion of variation in the Y variable explained by the
regression model.
 Values closer to 1 indicate a good fit.
Linear Regression for Business Statistics

R-square
[ A “goodness of fit” measure ]

 Varies from 0 through 1.


 Proportion of variation in the Y variable explained by the
regression model.
 Values closer to 1 indicate a good fit.
Linear Regression for Business Statistics
Regression is a process that has errors
 Residuals and Errors.
 R-square: A “goodness of fit” measure.
Linear Regression for Business Statistics
Regression is a process that has errors
 Residuals and Errors.
 R-square: A “goodness of fit” measure.

Why do we have errors in the regression model ?


 Omitted variables.
 Functional relationship between the Y and X variables.
 The theory of regression analysis is based on certain
assumptions about these errors.
Linear Regression for Business Statistics
Regression is a process that has errors
 Residuals and Errors.
 R-square: A “goodness of fit” measure.

Why do we have errors in the regression model ?


 Omitted variables.
 Functional relationship between the Y and X variables.
 The theory of regression analysis is based on certain
assumptions about these errors.
Linear Regression for Business Statistics
Regression is a process that has errors
 Residuals and Errors.
 R-square: A “goodness of fit” measure.

Why do we have errors in the regression model ?


 Omitted variables.
 Functional relationship between the Y and X variables.
 The theory of regression analysis is based on certain
assumptions about these errors.
Linear Regression for Business Statistics
Regression is a process that has errors
 Residuals and Errors.
 R-square: A “goodness of fit” measure.

Why do we have errors in the regression model ?


 Omitted variables.
 Functional relationship between the Y and X variables.
 The theory of regression analysis is based on certain
assumptions about these errors.
Linear Regression for Business Statistics
Regression is a process that has errors
 Residuals and Errors.
 R-square: A “goodness of fit” measure.

Why do we have errors in the regression model ?


 Omitted variables.
 Functional relationship between the Y and X variables.
 The theory of regression analysis is based on certain
assumptions about these errors.

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