Scribd
Upload
8 views

BA TopicB LoR

Uploaded by

rahulislam.dm253059
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
8 views

BA TopicB LoR

Uploaded by

rahulislam.dm253059
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 29

Business Analytics

(Term 3, PGDM, Jan-March 2024)

--
Topic B
Topic: Probabilistic Prediction
(Classification – Logistic Regression
--
Rushikesh P Borse, PhD
Faculty – Analytics, Great Lakes Institute of Management, Chennai
Contents to be discussed…

• Regression
• Problems with linear regression
• Odds
• Logistic regression
• Case Study + Business Implications
• Implementation on Excel (Logit)
Where all do we need to predict a Class?
Different (Classification) Prediction Techniques

• Logistic Regression
• Artificial Neural network (ANN)
• Decision Trees
• Naïve Bayes
• Support Vector Machines (SVM)
• KNN classifier
• Random forest
• Ensemble learning techniques
• Deep Learning (CNN)
Different (Classification) Prediction Techniques

• Logistic Regression
• Artificial Neural network (ANN)
• Decision Trees
• Naïve Bayes
• Support Vector Machines (SVM)
• KNN classifier
• Random forest
• Ensemble learning techniques
• Deep Learning (CNN)
Application of Logistic Regression in…

• Analyze customer data and predict


whether or not they are likely to
purchase a particular product.
Application of Logistic Regression in…

• To Assess credit risk and determine the


probability of defaulting on a loan.
Application of Logistic Regression in…

• It can be used in healthcare to predict the


likelihood of a patient developing a certain
disease or condition.
Application of Logistic Regression in…

• To know how GPA, CAT score, and


number of AP classes taken impact
the probability of getting admission
into a particular university.
Application of Logistic Regression in…

• Predicting customer churn


Application of Logistic Regression in…

• Hotel Booking: trying to predict either


user will cancel the booking or not.
Application of Logistic Regression in…

• More applications…
For Regression
Need of logistic over linear Regression ?
But what if the data contains an outlier? Things would become shambles.
For Probabilistic prediction (classification )
• 1.
Logistic regression – The math behind it

• Z = b0+b1X1 – If one IV

• Z = b0+b1X1 + b2X2 + b3X3 +… - For multiple IVs

• P = exp(z) / (1+exp(z))

• P = 1 / (1+exp(-z))

• For any values of X and b results in P in interval [0,1]


Logistic regression- odds function

• P = exp(z) / (1+exp(z))

• P = 1 / (1+exp(-z))

• Odds = probability of success Vs probability of failure = p/(1-p)


= exp(z)

• Log odds = z
Relationship between Probability, odds ratio
Relation ship between Probability, odds ratio and log of odds ratio.
One verses the another…
Odds and Log odds
Odds and Odds ratio – An medical example
Odds and Odds ratio – An medical example

The odds that a person having cough/cold, also has fever =

The odds that a person not having cough/cold, also has fever =

∴ The objective odds =

This shows that the likelihood that a person having cough/cold


also has fever is 21 times more likely than that of a person not
having cough/cold.
Basic requirement of LR
• DV – Should be binary
• IV – should be uncorrelated to each other
(multi-collinearity should be less)
• Large sample sizes are good for LR
• Threshold is required to establish the forecast
• Works well, when data is linearly separable.

• Limitations
• Sensitive to outliers
• Only significant features should be used to construct LOR
model, otherwise incorrect predictions will happen
Implementation

• 1. on excel with admission dataset


• (with various column adjust, significance of parameters,
Interpretations)

• 2. on excel with predicting customer churn

• 3. Python Implementation (Admission)


Implementation

• Python Implementation (Disease Prediction - Diabetes)


Activity Time- Graded quiz
Thank you

[email protected]

You might also like