Regression is a statistical technique which establish a functional relationship between two or more variables in the form of an equation to estimate

the value of one variable based on the value of another variable.

Regression Analysis
Simple Linear Regression Model y = F0 + F1x + I Simple Linear Regression Equation y = F0 + F1x Estimated Simple Linear Regression Equation

y ! b0  b1x

Principle of least squares technique

Case 1: Observed points : (4,8); (8,1); (12,6) Estimated points : (4,6); (8,5); (12,4)

Observed points : (4,8); (8,1); (12,6) Estimated points : (4,2); (8,5); (12,8)

Error (graph 1) 8-6=-2 1-5=-4 6-4=2 Total error=0

Error (graph 2) 8-2=6 1-5=-4 6-8=-2 Total error=0

Absolute error I8-6I=2 I1-5I=4 I6-4I=2 Total Absolute error=8

Absolute error I8-2I=6 I1-5I=4 I6-8I=2 Total Abs error=12

Case 2: Observed points: (2,4); (6,7); (10,2) Estimated points: (2,4); (6,3); (10,2)

Observed points: (2,4); (6,7); (10,2) Estimated points: (2,5); (6,4); (10,3)

Abs Error I4-4I=0 I7-3I=4 I2-2I=0 Total Abs error=4

Abs Error I4-5I=1 I7-4I=3 I2-3I=1 Total Abs error=5

Error Square (4-4)2 =0 (7-3) 2=16 (2-2) 2=0

ErrorSquare (4-5) 2=1 (7-4) 2=9 (2-3) 2=1

Sum of error square=16 (Graph 1) Sum of error square=11 (Graph 2)

Least Squares Method

Least Squares Criterion

min ( yi  yi )

where: yi = observed value of the dependent variable for the i th observation

y i ! estimated value of the dependent variable for the ith observatio n

 Slope for the Estimated Regression Equation

b1 !

n xy   x  y n x2   x
2

x = value of independent variable for ith observation y = value of dependent variable for ith observation n = total number of observations y-Intercept for the Estimated Regression Equation

b0 ! y  b1 x
x ! mean value or independent variable y ! mean value or dependent variable

 Simple Linear Regression Reed Auto periodically has a special week-long sale. As part of the advertising campaign Reed runs one or more television commercials during the weekend preceding the sale. Data from a sample of 5 previous sales are shown below.

Number of TV Ads 1 3 2 1 3

Number of Cars Sold 14 24 18 17 27

 The HRD manager of a company wants to find a measure which he can use to fix the monthly income of persons applying for a job in the production department. As an experimental project, he collected data on 7 persons from that department referring to years of service and their monthly income (in 000s).
Years of experience Income

11 10

7 8

9 6

5 5

8 9

6 7

10 11

 Find the regression equation of income on years of service. What initial start would you recommend for a person applying for the job after having served in a similar capacity in another company for 13 years? Do you think other factors are to be considered (in addition to the years of service) in fixing the income? Explain.

Properties of regression lines and their coefficients: 1. Correlation coefficient is the geometric mean between the regression coefficient 2. The sign of correlation coefficient is the same as that of regression coefficient. 3. Regression coefficients are dependent of the change origin but not of scale.

 In partially destroyed laboratory record of an analysis of correlation data, the following results only are available. Variance of X is 9 Regression equations : 8x-10y+66=0 40x-18y=214 Find 1. The mean values of x and y 2. The correlation coefficient between x and y 3. The standard deviation of y