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Regression Analysis.
Linear Regression
PLAN

1. Least squares regression line, slope and intercept

values.
2. The Standard Error of Estimate.

3. Construction and interpretation a confidence interval

and prediction interval for the dependent variable.

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Regression Analysis

 In regression analysis we use the independent

variable (X) to estimate the dependent variable (Y).

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Regression Analysis
The regression equation: Y’= a + bX, where:
 Y’ is the average predicted value of Y for any X.

 a is the Y-intercept. It is the estimated Y value

when X=0
 b is the slope of the line, or the average change in
Y’ for each change of one unit in X
 the least squares principle is used to obtain a and b.

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 13- 4

Regression Analysis
 The least squares principle is used to obtain a and b. The
equations to determine a and b are:

n( XY )  ( X )( Y )
b
n(  X 2 )  (  X ) 2
Y X
a b
n n

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 13- 5

EXAMPLE 1
 Dan Ireland, the student body president at
Toledo State University, is concerned about the
cost to students of textbooks. He believes there
is a relationship between the number of pages
in the text and the selling price of the book. To
provide insight into the problem he selects a
sample of eight textbooks currently on sale in
the bookstore. Draw a scatter diagram.
Compute the correlation coefficient.

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 13- 6

EXAMPLE 1 continued

Book Page Price ($)

Into to History 500 84
Basic Algebra 700 75
Into to Psyc 800 99
Into to Sociology 600 72
Bus. Mmgt 400 69
Intro to Biology 500 81
Fund. of Jazz 600 63
Princ. of Nursing 800 93
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 13- 7

EXAMPLE 1 continued

Develop a regression equation for the information given in

that can be used to estimate the selling price based
on the number of pages.

8(397 ,200 )  (4,900 )( 636 )

b  .05143
8(3,150 ,000 )  (4,900 ) 2

636 4,900
a  0.05143  48 .0
8 8

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 13- 8

Example 1 continued
The regression equation is:

Y’ = 48.0 + .05143X

 The equation crosses the Y-axis at $48. A book with no

pages would cost $48.
 The slope of the line is 0.05143. Each addition page
costs about a nickel.
 The sign of the b value and the sign of r will always be
the same.
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 13- 9

Example 1 continued

We can use the regression equation to estimate values of Y.

 The estimated selling price of an 800 page book is $89.14, found

by

Y   48 .0  0.05143 X
 48 .0  0.05143 (800 )  89 .14

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2. The Standard Error of Estimate

 The standard error of estimate measures the scatter, or
dispersion, of the observed values around the line of
regression

The formulas that are used to compute the standard

error:
(Y  Y ) 2
s y. x 
n2
Y 2  aY  bXY

n2
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 13- 11

Example 2
Find the standard error of estimate for xathe problem involving the
number of pages in a book and the selling price from Example 1.

Y 2  aY  bXY
s y. x 
n2
51,606  48(636 )  0.05143 (397 ,200 )

82
 10 .408

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 13- 12
3. Assumptions Underlying Linear
Regression
 For each value of X, there is a group of Y values,
and these Y values are normally distributed.
The means of these normal distributions of Y
values all lie on the straight line of regression.
The standard deviations of these normal
distributions are equal.
The Y values are statistically independent. This
means that in the selection of a sample, the Y values
chosen for a particular X value do not depend on the
Y values for any other X values.

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 13- 13

Confidence Interval
 The confidence interval for the mean value of Y for a
given value of X is given by:

1 ( X  X )2
Y   ts y. x 
n (X ) 2
X 
2
n
1 (800  612 .5) 2
89 .14  2.447 (10 .408 ) 
8 (4900 ) 2
3,150 ,000 
8
89 .14  15 .31

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 13- 14

Prediction Interval

 The prediction interval for an individual value of Y

for a given value of X is given by:
1 ( X  X )2
Y   ts y. x 1 
n ( X ) 2
X 2 
n
1 (800  612 .5) 2
89 .14  2.447 (10 .408 ) 1  
8 (4900 ) 2
3,150 ,000 
8
89 .14  29 .72

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 13- 15

EXAMPLE 3


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