Applications of Regression analysis in Business.

1| Decision-making

Organisations, in order to run smoothly as well as efficiently, need better decisions and
must understand the effects of the decision taken. Organisations collect data about sales,
investments, expenditures and other parameters and analyse it for improvement. The
regression analysis helps the organisations to make sense of the data which is then used for
gaining insights into an organisation. Business analysts and data professionals use
the regression analysis to make strategic business decisions.

2| Optimisation Of Business

The motive of regression analysis is to turn the collected data into actionable insights. The
organisations are adopting data-driven decision making which eliminates the old-school
techniques like guesswork or assuming a hypothesis which eventually improves the
performance of work in an organisation. This analysis provides practical assistance to the
management unit of the organisation. With lots of data available, the data can be analysed
as well as understood to gain efficient insights and work smartly.

3| Predictive Analysis

Organisations use regression analysis in order to predict future events. In this process, the
business analysts predict the man of the dependent variables for given specific values of
the dependent variables. The multivariate linear regression is used for various important
purposes such as forecasting sale volumes or create growth plans, etc. According to this
article, the general procedure for using regression in order to make good predictions are
mentioned below:

Research the subject-area so that you can build on the work of others. This research with
the subsequent steps.

Collect data for the relevant variables.

Specify and assess your regression model.

If you have a model that adequately fits the data, use it to make predictions.

4| Risk Analysis
Most of the time while analysis data, the analyst make mistakes and made a confusion
between correlation and causation. It is important to note and understand that correlation is
not causation. The regression analysis is used by the organisations to assess the risk in the
financial domain and other such domains and thus guide to make crucial business
decisions. The linear regression analysis developed the capital asset pricing mod el which
helps in taking financial decisions.

5| Understand The Failures

Besides the analysis of data, regression analysis also helps an organisation to understand
any failure and learns from it to correct in the future analysis. Thee regression analysis
basically provides quantitative support for the decision-making process. Predicting success
can be said as one of the main assets of regression analysis such as analysing the data
points of previous sales data as well as current sales data in an organisati on to understand
and predict the future success.

2) Nonlinear Regression Equations

I showed how linear regression models have one basic configuration. Now, we’ll focus on the
“non” in nonlinear! If a regression equation doesn’t follow the rules for a linear model, then it
must be a nonlinear model. It’s that simple! A nonlinear model is literally not linear.

The added flexibility opens the door to a huge number of possible forms. Consequently,
nonlinear regression can fit an enormous variety of curves. However, because there are so
many candidates, you may need to conduct some research to determine which functional form
provides the best fit for your data.

Below, I present a handful of examples that illustrate the diversity of nonlinear regression
models. Keep in mind that each function can fit a variety of shapes, and there are many
nonlinear functions. Also, notice how nonlinear regression equations are not comprised of
only addition and multiplication! In the table, thetas are the parameters, and Xs are the
independent variables.

Linear Regression Equations

A linear regression model follows a very particular form. In statistics, a regression model is
linear when all terms in the model are one of the following:

The constant
A parameter multiplied by an independent variable (IV)
Then, you build the equation by only adding the terms together. These rules limit the form to
just one type:
Dependent variable = constant + parameter * IV + … + parameter * IV

Statisticians say that this type of regression equation is linear in the parameters.
However, it is possible to model curvature with this type of model. While the function
must be linear in the parameters, you can raise an independent variable by an
exponent to fit a curve. For example, if you square an independent variable, the model
can follow a U-shaped curve.

Y =\beta _{0} + \beta _{1}X_{1} + \beta _{2}X_{1}^2

While the independent variable is squared, the model is still linear in the parameters.
Linear models can also contain log terms and inverse terms to follow different kinds
of curves and yet continue to be linear in the parameters.