Regression Analysis ASAP

Regression Analysis is a very powerful tool in the field of statistical

analysis in predicting the value of one variable, given the value of another
variable, when those variables are related to each other

 Regression Analysis is mathematical measure of average relationship

between two or more variables.
 Regression analysis is a statistical tool used in prediction of value of unknown
variable from known variable.
 Regression Analysis ASAP

Regression analysis is a reliable method of identifying which variables have

impact on a topic of interest. The process of performing a regression allows
you to confidently determine which factors matter most, which factors can be
ignored, and how these factors influence each other.

In order to understand regression analysis fully, it’s essential to comprehend the

following terms:
• Dependent Variable: This is the main factor that you’re trying to understand
or predict.
• Independent Variables: These are the factors that you hypothesize have an
impact on your dependent variable.
 Applications of regression Analysis ASAP

Objective of Regression analysis is to explain variability in dependent variable by

means of one or more of independent or control variables.
Applications : There are four broad classes of applications of regression analysis.
1.Descriptive or explanatory: interest may be on describing “What factors influence
variability in dependent variable?” For example, factor contributing to higher sales
among company’s sales force.

2. Predictive, for example setting normal quota or baseline sales. We can also use
estimated equation to determine “normal” and “abnormal” or outlier observations
 Applications of regression Analysis ASAP

3. Comparing Alternative theoretical explanations, – Consumers use reference price

in comparing alternatives, – Consumers use specific price points in comparing
alternatives.

4. Decision purpose, – Estimating variable and fixed costs having calibrated cost
function. – Estimating sales, revenues and profits having calibrated demand function.
– Setting optimal values of marketing mix variables. – Using estimated equation for
“What if” analysis.
 Data requirement for Regression Analysis ASAP

• Measurement on two or more variables one of which must be dependent.

• Dependent variable must have interval or ratio scale measurement.
• If independent variables are nominal scaled (e.g. brand choice), then
appropriate caution must be maintained so that results from analysis can be
interpreted. For example, it may be necessary to create variables that take
values 0 and 1 or dummy variables.
 Geometry for regression Analysis ASAP

 Any line can be described by an equation

 For any point on a line for X, there will be a corresponding Y

the equation for this is y = mx + b

m is the slope, b is the Y-intercept (when X = 0)
 m = change in Y per unit change in X
 b = where the line crosses the Y axis (when X = 0)
 Regression Line ASAP

 Regression line is the line which gives the best estimate of one variable from
the value of any other given variable.
 The regression line gives the average relationship between the two
variables in mathematical form.
 For two variables X and Y
Regression line of X on Y : gives the best estimate for the value of Y for any
specific given values of X

y= Dependent variable
x= Independent variable
 Simple Linear Regression ASAP

Example: In case we’d want to measure the historical levels of satisfaction with the
events from the past three years or so (or however long you deem statistically
significant), as well as any information possible in regards to the independent
variables.
Perhaps we’re particularly curious about how the price of a ticket to the event has
impacted levels of satisfaction.

To begin investigating whether or not there is a relationship between these two

variables, we would begin by plotting these data points on a chart, which
would look like the following theoretical example.
 Simple Linear Regression ASAP

Our dependent variable (in this case, the

level of event satisfaction) should be
plotted on the y-axis, while our
independent variable (the price of the
event ticket) should be plotted on the
x-axis.
Once your data is plotted, you may
begin to see correlations.
 Simple Linear Regression ASAP

But how can we tell the degree to which ticket price affects event satisfaction?
To begin answering this question, draw a line through the middle of all of the data points on the chart.
This line is referred to as your regression line

The formula for a regression line might

look something like Y = 100 + 7X

This tells you that if there is no “X”, then

Y = 100. If X is our increase in ticket
price, this informs us that if there is
no increase in ticket price, event
satisfaction will still increase by 100
points.
 Data requirement for Regression Analysis ASAP

At the heart of a regression model is the relationship between two different

variables, called the dependent and independent variables. For instance, suppose
you want to forecast sales for your company and you've concluded that your
company's sales go up and down depending on changes in GDP.
The sales you are forecasting would be the dependent variable because their
value "depends" on the value of GDP and the GDP would be the independent
variable. You would then need to determine the strength of the relationship
between these two variables in order to forecast sales. If GDP
increases/decreases by 1%, how much will your sales increase or decrease?
 Simple Linear Regression ASAP

So if there was no change in GDP,

your company would still make some
sales. This value, when the change
in GDP is zero, is the intercept. Take
a look at the graph below to see a
graphical depiction of a regression
equation. In this graph, there are only
five data points represented by the
five dots on the graph. Linear
regression attempts to estimate a
line that best fits the data (a
line of best fit) and the equation of
that line results in the regression
equation.
 Explanation of Regression Line ASAP

 In case of perfect correlation ( positive or negative ) the two line of regression

coincide.
 If the two R. line are far from each other then degree of correlation is less, &
vice versa.
 The mean values of X &Y can be obtained as the point of intersection of the
two regression line.
 The higher degree of correlation between the variables, the angle between
the lines is smaller & vice versa.
 Explanation of Regression Line ASAP

Y = .823X + -
4.239
We can predict a Y score from an X by plugging a
value for X into the equation and calculating Y
What would we expect a person to get on quiz #4 if they got a
12.5 on quiz #3?

Y = .823(12.5) + -4.239 =
6.049
 Linear Regression Equation ASAP

To determine the equation of the regression line for a sample of data, the
researcher must determine the values for b0 and b1. This process is sometimes
referred to as least squares analysis. Least squares analysis is a process
whereby a regression model is developed by producing the minimum sum of the
squared error values. On the basis of this premise and calculus, a particular set of
equations has been developed to produce components of the regression model.
 Linear Regression Equation ASAP

SS= Sum of squares

Example ASAP

Solving for the Slope and

the y Intercept of the
Regression Line for the
Airline Cost Example
Example ASAP
Example ASAP
Example ASAP
Excercise ASAP
Excercise ASAP
Excercise ASAP
 Multiple Linear regression ASAP

Multiple regression generally explains the relationship between multiple

independent or predictor variables and one dependent or criterion variable. A
dependent variable is modeled as a function of several independent variables with
corresponding coefficients, along with the constant term. Multiple regression
requires two or more predictor variables, and this is why it is called multiple
regression.
 Multiple Linear regression ASAP

You can use multiple linear regression when you want to know:
1.How strong the relationship is between two or more independent variables and
one dependent variable (e.g. how rainfall, temperature, and amount of fertilizer
added affect crop growth).
2.The value of the dependent variable at a certain value of the independent
variables (e.g. the expected yield of a crop at certain levels of rainfall,
temperature, and fertilizer addition).
 Multiple Linear regression ASAP

For example, you could use multiple regression to understand whether exam
performance can be predicted based on revision time, test anxiety, lecture
attendance and gender. Alternately, you could use multiple regression to
understand whether daily cigarette consumption can be predicted based on
smoking duration, age when started smoking, smoker type, income and gender.
Multiple Linear regression equation ASAP
 Multiple Linear regression equation ASAP

Example - The Association Between BMI and Systolic Blood Pressure

Suppose we want to assess the association between BMI and systolic blood pressure using data
collected in the seventh examination of the Framingham Offspring Study. A total of n=3,539
participants attended the exam, and their mean systolic blood pressure was 127.3 with a standard
deviation of 19.0. The mean BMI in the sample was 28.2 with a standard deviation of 5.3.

A simple linear regression analysis reveals the following:

 Multiple Linear regression equation ASAP

Suppose we now want to assess whether age (a continuous variable, measured in years), male
gender (yes/no), and treatment for hypertension (yes/no) are potential confounders, and if so,
appropriately account for these using multiple linear regression analysis.

For analytic purposes, treatment for hypertension is coded as 1=yes and 0=no. Gender is coded as
1=male and 0=female. A multiple regression analysis reveals the following:
 Multiple Linear regression equation ASAP

Notice that the association between BMI and systolic blood pressure is smaller (0.58 versus 0.67) after
adjustment for age, gender and treatment for hypertension. BMI remains statistically significantly associated
with systolic blood pressure (p=0.0001), but the magnitude of the association is lower after adjustment.
 Multiple Linear regression equation ASAP

For example, we can estimate the blood pressure of a 50 year old male, with a BMI of 25 who is not on
treatment for hypertension as follows:

We can estimate the blood pressure of a 50 year old female, with a BMI of 25 who is on
treatment for hypertension as follows:
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Thank you