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    Regression Analysis

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    Asad Ali
    Regression analysis is used when you want to predict a continuous dependent variable from a number of independent variables. If the dependent variable is dichotomous, then logistic regression should be used. (If the split between the two levels of the dependent variable is close to 50-50, then both logistic and linear regression will end up giving you similar results.) The independent variables used in regression can be either continuous or dichotomous. Independent variables with more than two levels can also be used in regression analyses, but they first must be converted into variables that have only two levels. This is called dummy coding and will be discussed later. Usually, regression analysis is used with naturally-occurring variables, as opposed to experimentally manipulated variables, although you can use regression with experimentally manipulated variables. One point to keep in mind with regression analysis is that causal relationships among the variables cannot be determined. While the terminology is such that we say that X "predicts" Y, we cannot say that X "causes" Y.

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    Regression Analysis

    Uploaded by

    Asad Ali
    125 views28 pages
    Regression analysis is used when you want to predict a continuous dependent variable from a number of independent variables. If the dependent variable is dichotomous, then logistic regression should be used. (If the split between the two levels of the dependent variable is close to 50-50, then both logistic and linear regression will end up giving you similar results.) The independent variables used in regression can be either continuous or dichotomous. Independent variables with more than two levels can also be used in regression analyses, but they first must be converted into variables that have only two levels. This is called dummy coding and will be discussed later. Usually, regression analysis is used with naturally-occurring variables, as opposed to experimentally manipulated variables, although you can use regression with experimentally manipulated variables. One point to keep in mind with regression analysis is that causal relationships among the variables cannot be determined. While the terminology is such that we say that X "predicts" Y, we cannot say that X "causes" Y.

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    Regression analysis is used when you want to predict a continuous dependent variable from a number of independent variables. If the dependent variable is dichotomous, then logistic regression should be used. (If the split between the two levels of the dependent variable is close to 50-50, then both logistic and linear regression will end up giving you similar results.) The independent variables used in regression can be either continuous or dichotomous. Independent variables with more than two levels can also be used in regression analyses, but they first must be converted into variables that have only two levels. This is called dummy coding and will be discussed later. Usually, regression analysis is used with naturally-occurring variables, as opposed to experimentally manipulated variables, although you can use regression with experimentally manipulated variables. One point to keep in mind with regression analysis is that causal relationships among the variables cannot be determined. While the terminology is such that we say that X "predicts" Y, we cannot say that X "causes" Y.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    125 views28 pages

    Regression Analysis

    Uploaded by

    Asad Ali
    Regression analysis is used when you want to predict a continuous dependent variable from a number of independent variables. If the dependent variable is dichotomous, then logistic regression should be used. (If the split between the two levels of the dependent variable is close to 50-50, then both logistic and linear regression will end up giving you similar results.) The independent variables used in regression can be either continuous or dichotomous. Independent variables with more than two levels can also be used in regression analyses, but they first must be converted into variables that have only two levels. This is called dummy coding and will be discussed later. Usually, regression analysis is used with naturally-occurring variables, as opposed to experimentally manipulated variables, although you can use regression with experimentally manipulated variables. One point to keep in mind with regression analysis is that causal relationships among the variables cannot be determined. While the terminology is such that we say that X "predicts" Y, we cannot say that X "causes" Y.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 28

    Regression Analysis

    Regression analysis is a mathematical measure of the averages relationship between two or more variable in terms of the original units of data. Types of Regression (i) Simple Regression (Two Variable at a time) (ii) Multiple Regression (More than two variable at a time) Linear Regression: If the regression curve is a straight line then there is a linear regression between the variables .

    Non-linear Regression/ Curvilinear Regression: If the regression curve is not a straight line then there is a non-linear regression between the variables.

    Simple Linear Regression Model & its Estimation


    A simple linear regression model is based on a single independent variable and its general form is:

    Yt X t t
    Here

    Slope/ Regression Coefficients

    Intercepts

    t
    (i)

    Yt = dependent variable or regressands X t = independent variable or regressor


    = random error or disturbance term

    Importance of error

    t term:

    It captures the effect of on the dependent variable of all variable not included in the model. (ii) It captures any specification error related to assumed linear functional form. (iii) It captures the effects of unpredictable random componenets present in the dependent variable.

    Estimation of the Model


    Yt Xt Sales Adver Exp (thousands (million of of Unit) Rs.)
    37 48 45 36 25 55 63 4.5 6.5 3.5 3 2.5 8.5 7.5

    t Y

    t X

    t yt Yt Y

    t xt X t X

    xtyt

    xt2

    =309/ 7

    36/7

    -7.14286 3.857143 0.857143 -8.14286 -19.1429 10.85714 18.85714

    -0.64286 1.357143 -1.64286 -2.14286 -2.64286 3.357143 2.357143

    4.591837 5.234694 -1.40816 17.44898 50.59184 36.44898 44.44898

    0.413265 1.841837 2.69898 4.591837 6.984694 11.27041 5.556122

    44.1428

    5.1428

    xt yt =157.37

    xt 2 = 33.354

    Yt =309

    Xt = 36

    Estimation of the Model


    x y x
    t 2 t

    157.357 4.717 33.354

    X 44.143 (4.717)(5.143) 19.882 Y


    Then the estimated simple linear regression model is

    Yt 19.882 4.717 X t

    x y x
    2 2 t

    157.357 4.717 33.354

    X 44.143 (4.717)(5.143) 19.882 Y

    Yt 19.882 4.717 X t

    General Formula for First Order Coefficients

    rYX .W

    rXY rXW rYW


    2 2 (1 rXW )(1 rYW )

    General Formula for Second Order Coefficients

    rYX .WO

    rXY .O rXW .O rYW .O (1 r


    2 XW .O

    )(1 r

    2 YW .O

    Partial Correlation
    Remarks: 1. Partial correlation coefficients lies between -1 & 1 2. Correlation coefficients are calculated on the bases of zero order coefficients or simple correlation where no variable is kept constant. Limitation: 1. In the calculation of partial correlation coefficients, it is presumed that there exists a linear relation between variables. In real situation, this condition lacks in some cases. 2. The reliability of the partial correlation coefficient decreases as their order goes up. This means that the second order partial coefficients are not as dependable as the first order ones are. Therefore, it is necessary that the size of the items in the gross correlation should be large. 3. It involves a lot of calculation work and its analysis is not easy.

    Partial Correlation
    Example: From the following data calculate 12.3 x1 : 4 0 1 1 1 3 x2 : 2 0 2 4 2 3 x3 : 1 4 2 2 3 0
    Solution:
    4 3 4 1 0 0

    X1

    16 2, 2

    X2

    16 2 and 2

    X3

    16 2 2

    Partial Correlation

    Multiple Correlation
    The fluctuation in given series are not usually dependent upon a single factor or cause. For example wheat yields is not only dependent upon rain but also on the fertilizer used, sunshine etc. The association between such series and several variable causing these fluctuation is known as multiple correlation. It is also defined as the correlation between several variable. Co-efficient of Multiple Correlation: Let there be three variable X1, X2 and X3. Let X1 be dependent variable, depending upon independent variable , X2 and X3. The multiple correlation coefficient are defined as follows:
    R1.23 = Multiple correlation with X1 as dependent variable and X2. and X3. , as independent variable R2.13 = Multiple correlation with X2 as dependent variable and X1. and X3. , as independent variable R3.12 = Multiple correlation with X3 as dependent variable and X1. and X2 , as independent variable

    Calculation of Multiple Correlation Coefficient


    General Formula

    For example

    Remarks
    Multiple correlation coefficient is a non-negative coefficient. It is value ranges between 0 and 1. It cannot assume a minus value. If R1.23 = 0, then r12 = 0 and r13=0 R1.23 r12 and R1.23 r13 R1.23 is the same as R1.32 (R1.23 )2 = Coefficient of multiple determination. If there are 3 independent variable and one dependent variable the formula for finding out the multiple correlation is

    R1.234 1 (1 r 214 )(1 r 212.3 )(1 r 212.34 )

    Limitation

    Advantages of Multiple Correlation

    Example
    Given the following data X1: 3 5 X2: 16 10 X3: 90 72 6 7 54 8 4 42 12 3 30 14 2 12

    Compute coefficients of correlation of X3 on X1 and X2

    Example

    Example

    Types of Correlation
    r12.3 is the correlation between variables 1 and 2 with variable 3 removed from both variables. To illustrate this, run separate regressions using X3 as the independent variable and X1 and X2 as dependent variables. Next, compute residuals for regression...

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