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1. Introduction

2. Definition

3. Use of Regression

4. Difference between correlation and regression

5. Method of studying Regression

6. Conclusion

7. Reference

1|Page

Introduction :

and strength of the relationship between two variables. Here we can estimate or

predict the value of one variable from the given value of the other variable. For

instance, price and supply are correlated. We can find out the expected amount

of supply for a given price or the required price level for attaining the given

amount of supply.

from the other variable or the independent variable. In other worlds, we can

estimate the value of one variable, provided the value of the other variable is

given. The statistical method which helps us to estimate the unknown value of

one variable from the known value of the related variable is called Regression.

The dictionary meaning of the word regression is ‘return’ or going back. In

1877, Sir Francis Galtion, first introduced the word regression, while studying

the relationship between the heights of fathers and sons. He studies about the

about the heights of 100 fathers and sons and gave his opinion that tall fathers

were having tall sons and short fathers were having short sons. He found out

that the average height of the sons of tall fathers was less than the average

height of the tall fathers. And the average height of the sons of short father was

more than the average height of the short father. The tendency to regression or

going back was called by Galton as the Line of Regression. The line describing

the average relationship between two variables is known as the line of

regression Now, the modern writers use the terms estimating line instead of

regression line.

2|Page

Definition:

relationship between two or more variables in terms of the original units of the

data.”

economics and business research, to find a relation between two or more

variables that are related casually is regression analysis.”

According to Walli’s and Robert, “It is often more important to find out

what the relation actually is in order to estimate or predict one variable (the

dependent variable), and the statistical technique appropriate in such a case is

called Regression Analysis”.

the nature of relationship between the variables, that is to study the functional

relationship between the variables X and Y, and thereby, provides a mechanism

for prediction or forecasting.

variable and (b) Dependent variable. The variable whose value is influenced or

is to be predicted is called Dependent variable, where as the variable which

influences the value or is used for prediction is called independent variable.

With the help of the regression analysis, we can estimate or predict the

unknown values of one variable from the known values of another variable. In

regression analysis, the independent variable is also known as the “Regressor”

or “Predictor” or “Explanator” and the dependent variable is known as

“regressed” or “explained” variable.

3|Page

Use Of Regression Analysis

Regression analysis is used in statistics and in all those fields where two

or more relative variables have a tendency to go back to the average. It is

used more than the correlation analysis in many scientific studies. It is

widely used in social sciences like economics, natural and physical

sciences. It is used to estimate the relationship between two economic

variables like income and expenditure. If we know the income, we can

find out the probable expenditure. Thus it is a highly valuable tool in

economics and business. Most of the economic issues are based on cause

and effect relationship. It is very useful for prediction purposes. In

business also, it is very helpful to study the business predictions. Cost of

production is affected by the sale of the product. Economists have arrived

at many predictions and theories on the basis of regression.

Regression analysis predicts the value of dependent variables from the

values of independent variables.

The regression analysis is highly useful and the regression line equation

helps to estimate the value of dependent variable, when the values of

independent variables are used in the equation.

We can calculate the coefficient of correlation (r) and the coefficient of

determination (r2) with the help of regression coefficient.

Using regression analysis, the statistical estimation of demand curves,

production function, consumption function, etc. can be predicted

abstract form a pure number. of the amount of relationship between the two

variables. It is an abstract number which measures the degree of the relationship

between the two variables. While dealing with economics and commercial data,

4|Page

we are required to make prediction or estimation. For instance, with a rise in

price. the demand for the commodity goes down; with better monsoon. output

of agricultural produces increases etc. The first objective of regression analysis

is or provide estimates of the values of the dependent variable from values of

independent variable. Prediction or estimation is one of the major problems in

almost all spheres of human activity. The prediction or estimation of future

activities are important or businessmen. Thus the statistical deck. with the help

of which, we estimate or predict the unknown values of one variable from the

known values of another variable, is known as regression. Regression analysis

is one of the scientific method for making such predictions. According to Blair.

‘Regression analysis is a mathematical measure of the average relationship

between two or more variables in tennis of the original units of the data”. This is

done with the help of the regression line. ‘[he regression line describes the

average relationship existing between X and Y variables, i.e.. it is a line which

displays mean values of Y for given values of X.

time is termed as simple regression. The regression analysis for studying more

than two variable sat at a lime is known as multiple regression

two variables which the regression establishes a functional relationship

between dependent and independent variables so that the former can be

predicted for a given value of the later. Correlation should recede regression ,

for if the relationship is not sufficiently strong there would appear to be no

sound lasis for prediction.

5|Page

The difference between correlation and regression are :

Correlation Regression

1. Correlation is the relationship Regression means going back and it is

between two or more variable. a mathematical measure showing the

Which vary in sympathy with average relation ship between two

the other in the same or the variables.

opposite direction

2. Both the variables X and Y are Here X is a random variable and Y is a

random variables. fixed variable. Sometimes both the

variables may be random variables.

3. It finds out the degree of It indicates the cause and effect

relationship between two relationship between the variables and

variables and not the cause and establishes a functional relationship.

effect of the variable.

4. It is used for testing and Beside verification it is used for the

verifying the relation between prediction of one value, in relationship

two variables and gives limited to the other given value

information

5. The co efficient of correlation is Regression coefficient is an absolute

a relative measure. The range of figure. If we know the value of the

relationship lies between + 1. independent variable, we can find the

variable. We can find the value of the

dependent variable.

6. There may be nonsense In regression there is nonsense

correlation between two regression.

variables.

7. It has limited application, It has wider application, as it studies

because it is confined only to linear and non- linear relationship

6|Page

linear relationships between the between the variables.

variables.

8. It is not vary useful for further It is widely used for further

mathematical treatment mathematical treatment

9. If the coefficient of correlation is The regression coefficient explains

positive, then the two variables that the decrease in one variable is

are positively correlated and associated with the increase in the

vice versa. other variable.

10. It is immaterial whether X There is a functional relationship

depends upon Y or Y depends between the two variables so that we

upon X. may identify between the independent

and dependent variables.

1. Graphic Method

2. Algebraic Method

1. Graphic Method: The points arc plotted on a graph paper representing

pairs of values of the concerned variables. In this diagram the

independent variable is taken on horizontal axis and dependent variable

on the vertical axis. These points give a picture of a scatter diagram. A

regression line may the drawn in between these points by free hand or by

a scale rule. It should be drawn carefully as the line of best fit leaving

equal number of points on both sides in such a manner that the sum of the

square of the distances is the least.

7|Page

The following illustration shows the regression line fitted on the scatter

diagram:

X Y

65 68

63 66

67 68

64 65

68 69

62 66

70 68

60 65

68 71

67 67

69 68

71 70

2. Algebraic Method:

line filled to the data by the method of least Squares. It indicates the best

probable mean value of one variable corresponding lo the mean value of the

other. Since a regression line is the line of best fit.it cannot he used conversely :

therefore. there are always two regression lines constructed for the relationship

between two variables, say, X and Y. Thus. One regression line shows

regression of X upon Y. and the other shows the regression of Y upon X .When

two variables have relationship, then we can draw a regression line. In the case

of two variables X and Y there are two regression lines. (a as the regression line

of Y on X arid (b) the regression line of X on Y. A line of regression gives the

8|Page

best average value of one variable for any given value of the other variable. The

regression line of X on Y gives the most probable values of X for any given

value of Y. In the same manner, the regression.

Line of Y on X gives the most probable values of Y for any given value

of X. Thus there will be two regression lines in the case of two variables.

correlation (-1) the two regression lines will coincide with each other, i.e., there

will be only one line. If the regression lines are nearer to each other, then there

is a higher degree of correlation. If the two line are farther away from each

other, then there is lessee degree of correlation. If r = 0, both variables are

independent. Both will cut each other at right angle.

The regression lines cut each other at the point of average of X and Y. If

we draw a perpendicular from the point to the X axis we will get the average

value of X and if we draw a perpendicular from the point to the Y axis we will

get the average vale of Y.

9|Page

Regression Equations: Regression equation is an algebraic method. It is an

algebraic expression of the regression line. It can be classified into regression

equation, regression coefficient, individual observation and group distribution.

As there are two regression lines, there are two regression equations. For

the two variables X and Y, there are two regression equations. They are

regression equation of X on Y and the regression equation of Y on X. the

former states the change in the value of X for a given change in the value of X

for a given change in Y and the latter states the change in the value of Y for a

given change in X

𝑅𝑒𝑔𝑟𝑒𝑠𝑠𝑖𝑜𝑛 𝐸𝑞𝑢𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑋 𝑜𝑛 𝑌

𝑥(𝑒) = 𝑎 + 𝑏𝑦

Here ‘a’ and ‘b’ the two unknown constants or the parameters of the line,

determine the position of the line, determine the position of the line. The

constant ‘a’ shows the level of the fitted line. It is the distance between the point

of origin and the point where the regression line touches the Y axis. The

constant ‘b’ shown the slope of the line Xc is the value of X computed from the

relationship for a given Y. by the least square method, we can find out the value

of ‘a’ and ‘b’ and determined the regression line, which is known as the line of

best fit. The formulae are.

∑ 𝑋 = 𝑁𝑎 + 𝑏 ∑ 𝑌

∑ 𝑋𝑌 = 𝑎 ∑ 𝑌 + 𝑏 ∑ 𝑌 2

2

N is the number of observed pairs of value. ∑ 𝑋, ∑ 𝑌, ∑ 𝑋𝑌, ∑ 𝑦 are the totals

and they are computed from the value of two variables X and Y. Thus we can fit

a least square line.

10 | P a g e

Conclusion :

from the other variable or the independent variable. In other worlds, we can

estimate the value of one variable, provided the value of the other variable is

given. The statistical method which helps us to estimate the unknown value of

one variable from the known value of the related variable is called Regression.

The dictionary meaning of the word regression is ‘return’ or going back. In

1877, Sir Francis Galtion, first introduced the word regression, while studying

the relationship between the heights of fathers and sons.

Reference :

publishing house Pvt.Ltd

2. Statisticks, T.S.N Pillai and bagavathi (1994). S.Chand and company

Ltd Ram nagar, New Delhi.

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