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How 2 Calculate Regression

# How 2 Calculate Regression

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12/24/2013

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EXCEL 2007: Multiple Regression
A. Colin Cameron, Dept. of Economics, Univ. of Calif. - Davis

This January 2009 help sheet gives information on

Multiple regression using the Data Analysis Add-in.

Interpreting the regression statistic.

Interpreting the ANOVA table (often this is skipped).

Interpreting the regression coefficients table.

Confidence intervals for the slope parameters.

Testing for statistical significance of coefficients

Testing hypothesis on a slope parameter.

Testing overall significance of the regressors.

Predicting y given values of regressors.

Excel limitations.There is little extra to know beyond regression with one explanatory variable.The main addition is the F-test for overall fit.

MULTIPLE REGRESSION USING THE DATA ANALYSIS ADD-IN
This requires the Data Analysis Add-in: see Excel 2007: Access and Activating theData Analysis Add-in The data used are in carsdata.xls  We then create a new variable in cells C2:C6, cubed household size as a regressor.Then in cell C1 give the the heading CUBED HH SIZE.(It turns out that for the se data squared HH SIZE has a coefficient of exactly 0.0 thecube is used).The spreadsheet cells A1:C6 should look like:

We have regression with an intercept and the regressors HH SIZE and CUBED HHSIZEThe population regression model is:
y = β
1

+ β
2
x
2

+ β
3
x
3
+ uIt is assumed that the error u is independent with constant variance (homoskedastic) -see EXCEL LIMITATIONS at the bottom.We wish to estimate the regression line: y = b
1
+ b
2
x
2
+ b
3
x
3
We do this using the Data analysis Add-in and Regression.The only change over one-variable regression is to include more than one column inthe Input X Range.

Note, however, that the regressors need to be in contiguous columns (here columns Band C).If this is not the case in the original data, then columns need to be copied to get theregressors in contiguous columns.Hitting OK we obtainThe regression output has three components:

Regression statistics table

ANOVA table

Regression coefficients table.
INTERPRET REGRESSION STATISTICS TABLE

This is the following output. Of greatest interest is R Square.
ExplanationMultiple R 0.895828 R = square root of RR Square 0.802508 RAdjusted R Square 0.605016 Adjusted R used if more than one x variable