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Linear Regression Analysis

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Linear Regression Analysis

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researchscholar49
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© © All Rights Reserved
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Linear Regression analysis

• In correlation we studied the concept of


statistical relationship between two variables
such as amount of fertilizer used and yield of a
crop; price of a product and its supply, level of
sales and amount of advertisement and so on.
The relationship between such variables do
indicate the degree and direction of their
association, but they do not answer the question
that whether there is any functional (or algebraic)
relationship between two variables? If yes, can it
be used to estimate the most likely value of one
variable, given the value of other variable?
• “In regression analysis we shall develop an estimating
equation i.e., a mathematical formula that relates the
known variables to the unknown variable. (Then, after
we have learned the pattern of this relationship, we
can apply correlation analysis to determine the degree
to which the variables are related. Correlation analysis,
then, tells us how well the estimating equation actually
describes the relationship). The variable which is used
to predict the unknown variables is called the
‘independent’ or ‘explaining’ variable, and the variable
whose value is to be predicted is called the
‘dependent’ or ‘explained’ variable.”
Often, two variables are related.
It is a statistical model in which there is only one
independent variable and the functional relationship
between dependent and independent variable and
the regression coefficient is linear.
Examples:
Amount of advertising expenses and amount of sales.
Daily temperature and daily water consumption.
When two variables are related, one can be
used to predict the value of the other.
Examples:
Knowing the amount of advertising expenses,
one can predict the amount of sales.
Knowing the daily temperature, one can predict
the amount of water consumption.
• DISTINCTION BETWEEN CORRELATION AND REGRESSION By
correlation we mean the degree of association or
relationship between two or more variables. Correlation
does not predict anything about the cause & effect
relationship. Even a high degree of correlation does not
imply necessarily that a cause & effect relationship exists
between the two variables Whereas in case of regression
analysis, there is a functional relationship between Y and X
such that for each value of Y there is only one value of X.
One of the variables is identified as a dependent variable
the other(s) as independent valuable(s). The expression is
derived for the purpose of predicting values of a dependent
variable on the basis of independent valuable(s).
• The Pearson correlation measures the degree
to which a set of data points form a straight
line relationship.
• Regression is a statistical procedure that
determines the equation for the straight line
that best fits a specific set of data.
• Any straight line can be represented by an
equation of the form Y = bX + a, where b and a
are constants.
• The value of b is called the slope constant and
determines the direction and degree to which
the line is tilted.
• The value of a is called the Y-intercept and
determines the point where the line crosses
the Y-axis.
• REGRESSION LINES
• A regression line is the line which shows the best mean
values of one variable correspond-ing to mean values of the
other. With two series X and Y, there are two arithmetic
regression lines, one showing the best mean values of X
corresponding to mean Y’s and the other showing the best
mean values of Y corresponding to mean X’s. In the context
of scatter diagram, the regression line is the straight line
that best fits the scatter diagram. The most commonly used
criteria is that it is the straight line that minimise the sum of
the squared deviations between the predicted and
observed values of the dependent variable. In the case of
two variables X and Y, there will be two regression lines as
the regression of X on Y and regression of Y on X.
• REGRESSION EQUATIONS
• There are different methods of deriving
regression equations
• (1) By taking actual values of X and Y
• (2) By taking deviations from actual mean
• (3) By taking deviations from assume mean

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