'Multiple linear regression' to understand the partial relationsh

A leading packaged food manufacturing company wants to study how the movements of market drivers can affect th
A primary business confidence demonstrates that Nifty 50 index is major influencer of company's share prices.
Secondary business opinions stands out with the crude oil prices and Consumer Price Index (CPI) that impact on shar
A multiple linear regression is conducted to understand partial as well as compound impact of each driver on the sha

Advantage of 'Multiple linear regression' over 'Single-effect reg

Partial regression coefficients allow to estimate the impact of one driver by adjusting the effects of other drivers.
It is a realistic estimate provided by the analysis in the presence of other drivers, which Single-effect regression analy

This can be shown in the equation form,

Share Price = Intercept + a1 X Nifty 50 Index + a2 X Crude Oil Prices + a3 X CPI Index
Where,
Intercept = Expected average value of Share Price when all the drivers have ZERO value
a1 = Estimated regression coefficient that quantifies the association between Share Price and Nifty 50 Index [Increas
a2 = Estimated regression coefficient that quantifies the association between Share Price and Crude Oil Prices [Incre
a3 = Estimated regression coefficient that quantifies the association between Share Price and CPI Index [Increase in

Multiple linear regression analysis can be used to assess whether confounding exists, since it allows us to estimate
Multiple linear regression analysis also provides a way of adjusting for (or accounting for) potentially confounding v

'Multiple linear regression' offers insights into other important

In 'Single-effect regression' analysis, (refer sheet "Single-effect ANOVA - Oil Price"), variable "Crude Oil Prices" is not
In 'Single-effect regression' analysis, (refer sheet "Single-effect ANOVA - CPI Index"), variable "CPI Index" is not signi

But, when 'Multivariate linear regression' analysis is conducted, both of above variables are significant and revealing
This will result in accurate prediction of Share Price by well specified system of variables.

Nifty 50 index Crude Oil Prices CPI index Share Price

8868 51 145 1128 Single-effect
9942 26 142 1137 1250
9738 18 147 1136 1200
8262 34 149 1081
1150 R² = 0.66
10853 27 143 1184
Share Price

1100

1050

1000
 1250

1200

1150 R² = 0.66

Share Price
10395 39 146 1167 1100

10566 41 142 1159 1050

8583 37 140 1056 1000
9821 47 149 1189
950
7897 52 148 1056
900
7911 21 147 1053 7000 7500 8000
11127 32 144 1187
9645 27 140 1055
9095 27 144 1077
10980 23 140 1142
8448 31 150 1102
9901 49 149 1134
8750 24 146 1060
10456 49 140 1126
7978 45 141 1059
7986 50 146 1083
10150 34 147 1161
8223 45 149 1073
9124 30 148 1106
7931 51 145 1008
10656 48 144 1184
7889 22 144 1038
9634 15 140 1121
8319 21 150 1075
9092 21 148 1068
8930 13 144 1043
9553 45 145 1142
7984 14 140 1034
8708 43 142 1048
9548 35 144 1129
9986 46 149 1111
8556 30 149 1134
9327 29 145 1093
10938 26 141 1145
8859 38 149 1073
8820 39 147 1113
10230 52 140 1107
8004 39 143 1053
8612 31 148 1098
10025 19 143 1133
9335 23 147 1120
9391 31 141 1062
8409 15 148 1079
8679 52 146 1137
8382 40 141 1069
10126 32 142 1104
10241 52 148 1157
10401 29 143 1146
7926 35 147 1028
9003 36 145 1070
8038 36 150 1076
8084 47 140 1053
9853 24 145 1078
7697 51 143 1055
10670 48 140 1133
10203 20 146 1153
9756 49 140 1123
9709 34 146 1091
8535 18 140 1090
9709 16 149 1148
7936 32 142 1073
8040 19 144 1053
10404 47 148 1184
8199 49 147 1093
7873 33 145 1057
8233 49 150 1081
11130 49 141 1113
7990 20 146 1065
11081 14 142 1180
9764 17 145 1108
9387 20 142 1080
10382 17 150 1114
8478 49 143 1093
10099 49 150 1143
8091 19 145 1058
10041 40 142 1118
10146 39 149 1143
8061 39 144 1056
10182 25 148 1142
8130 24 146 1096
8260 22 146 1069
9283 20 142 1097
8652 41 140 1057
9282 22 140 1080
9961 45 147 1135
8113 44 147 1054
10148 51 143 1156
7742 23 141 1009
8768 36 149 1089
9864 44 140 1138
 9339 43 141 1133
9504 18 142 1095
10726 33 146 1174
9598 42 147 1098
8715 34 149 1058
9029 28 147 1083
8874 22 141 1088
9663 42 144 1092
8601 20 144 1044
artial relationship between multiple variables
market drivers can affect the price of its share.
mpany's share prices.
dex (CPI) that impact on share prices.
act of each driver on the share prices.

ingle-effect regression'
effects of other drivers.
ngle-effect regression analysis can't do, since it takes into consideration effect of one driver at a time.

a3 X CPI Index

e and Nifty 50 Index [Increase in Share Price = a1 per unit increase in Nifty 50 Index]
e and Crude Oil Prices [Increase in Share Price = a1 per unit increase in Crude Oil Prices]
e and CPI Index [Increase in Share Price = a1 per unit increase in CPI Index]

nce it allows us to estimate the association between a given independent variable and the outcome holding all other variables constant
r) potentially confounding variables that have been included in the model.

ther important variables, that might be ignored otherwise !!

ble "Crude Oil Prices" is not significant. Hence, will be ignored.
able "CPI Index" is not significant. Hence, will be ignored.

re significant and revealing important insights into the whole system. (Refer sheet "Multiple Regression ANOVA")

Single-effect Regression : Nifty 50 Index Single-effect Regression :

1250 1250

1200 1200

1150 R² = 0.663074711636471 1150

Share Price

1100 1100
R² = 0.022835486114366
1050 1050

1000 1000
1250 1250

1200 1200

1150 R² = 0.663074711636471 1150

Share Price
1100 1100
R² = 0.022835486114366
1050 1050

1000 1000

950 950

900 900
7000 7500 8000 8500 9000 9500 10000 10500 11000 11500 10 15 20 25 30

Nifty 50 Index Crude Oil

Single-effect Regression - CPI Index

1250

1200

1150
Share Price

1100
R² = 0.008677182676839
1050

1000

950

900
138 140 142 144 146 148 150 152

CPI Index
other variables constant.

effect Regression : Crude Oil Prices

0.022835486114366
0.022835486114366

20 25 30 35 40 45 50 55

Crude Oil Prices

152
SUMMARY OUTPUT FOR MULTIPLE LINEAR REGRESSION WITH ALL 3 VARIABLES

Regression Statistics
Multiple R 0.8510
R Square 0.7242
Adjusted R Square 0.7159
Standard Error 22.6900
Observations 104

ANOVA
df SS MS F Significance F
Regression 3 135168.4433 45056.1478 87.5153 0.0000
Residual 100 51483.7106 514.8371
Total 103 186652.1538

Coefficients Standard Error t Stat P-value Lower 95%

Intercept 328.1719 107.9235 3.0408 0.0030 114.0548
Nifty 50 index 0.0373 0.0023 15.8631 0.0000 0.0326
Crude Oil Prices 0.4105 0.1895 2.1658 0.0327 0.0345
CPI index 2.8675 0.7092 4.0434 0.0001 1.4605

Positive weights shows that all 3 variables have significant partial impact on "SH
 This shows a significant system of all 3 variables that impacts on "SHARE PRICE"

Upper 95% Lower 95.0% Upper 95.0%

542.2890 114.0548 542.2890
0.0419 0.0326 0.0419
0.7864 0.0345 0.7864
4.2745 1.4605 4.2745

ve significant partial impact on "SHARE PRICE".

SUMMARY OUTPUT FOR SINGLE-EFFECT REGRESSION FOR VARIABLE "CRUDE OIL PRICES"

Regression Statistics
Multiple R 0.1511
R Square 0.0228
Adjusted R Square 0.0133
Standard Error 42.2864
Observations 104

ANOVA
df SS MS F Significance F
Regression 1 4262.2927 4262.2927 2.3837 0.1257
Residual 102 182389.8612 1788.1359
Total 103 186652.1538

Coefficients Standard Error t Stat P-value Lower 95%

Intercept 1081.9762 12.5767 86.0303 0.0000 1057.0304
Crude Oil Prices 0.5441 0.3524 1.5439 0.1257 -0.1549

Positive weight shows that "CRUDE OIL PRICES" has insignificant direct/margina
 Variable "CRUDE OIL PRICES" doesn't have any direct/marginal statistically significant impact on "SHARE PR
It may have an indirect/partial impact on "SHARE PRICE" through other variables.

Upper 95% Lower 95.0% Upper 95.0%

1106.9219 1057.0304 1106.9219
1.2431 -0.1549 1.2431

S" has insignificant direct/marginal impact on "SHARE PRICE".

 ly significant impact on "SHARE PRICE"
variables.
SUMMARY OUTPUT FOR SINGLE-EFFECT REGRESSION FOR VARIABLE "CPI INDEX"

Regression Statistics
Multiple R 0.0932
R Square 0.0087
Adjusted R Square -0.0010
Standard Error 42.5916
Observations 104

ANOVA
df SS MS F Significance F
Regression 1 1619.6148 1619.6148 0.8928 0.3469
Residual 102 185032.5390 1814.0445
Total 103 186652.1538

Coefficients Standard Error t Stat P-value Lower 95%

Intercept 920.6608 190.1703 4.8412 0.0000 543.4589
CPI index 1.2411 1.3135 0.9449 0.3469 -1.3642

Positive weight shows that "CPI INDEX" has insignificant direct/marginal impac
 Variable "CPI INDEX" doesn't have any direct/marginal statistically significant impact on "SHARE PRICE"
It may have an indirect/partial impact on "SHARE PRICE" through other variables.

Upper 95% Lower 95.0% Upper 95.0%

1297.8626 543.4589 1297.8626
3.8463 -1.3642 3.8463

nsignificant direct/marginal impact on "SHARE PRICE".

ficant impact on "SHARE PRICE"
variables.