Chapter 14-Introduction To Multiple Regression

ĐẠI HỌC FPT CẦN THƠ
Chapter 14
Introduction to Multiple Regression
Dr. Tran Quoc Duy Applied Statistics for Business

Chapter 14
Introduction to Multiple
Regression

Objectives
In this chapter, you learn:
 How to develop a multiple regression model.
 How to interpret the regression coefficients.
 How to determine which independent variables to include in
the regression model.
 How to determine which independent variables are most
important in predicting a dependent variable
 How to use categorical independent variables in a regression
model.
 How to use logistic regression to predict a categorical
dependent variable.

The Multiple Regression Model With k

Independent Variables
Idea: Examine the linear relationship between
1 dependent (Y) & 2 or more independent variables (Xi).
Multiple Regression Model with k Independent Variables:
Y-intercept Population slopes Random Error
Yi  β 0  β1X1i  β 2 X 2i      β k X ki  ε i
Where:
β0 = Y intercept
β1 = slope of Y with variable X1, holding X2, X3, X4, . . . , Xk constant
β2 = slope of Y with variable X2, holding X1, X3, X4, . . . , Xk constant
β3 = slope of Y with variable X3, holding X1, X2, X4,. . . , Xk constant
.
.
βk = slope of Y with variable Xk, holding X1, X2, X3,. . . , Xk-1 constant
εi = random error in Y for observation i

Multiple Regression Model With 2
DCOVA
Yi  β 0  β1X1i  β 2 X 2i  ε i
Where:
β0 = Y intercept
β1 = slope of Y with variable X1, holding X2 constant
β2 = slope of Y with variable X2, holding X1 constant
εi = random error in Y for observation i

Multiple Regression Equation

DCOVA
The coefficients of the multiple regression model are

estimated using sample data.
Multiple regression equation with k independent variables:

Estimated Estimated
(or predicted) Estimated slope coefficients
intercept
value of Y
ˆ  b  b X  b X    b X
Yi 0 1 1i 2 2i k ki
In this chapter we will use Excel, JMP, and Minitab to obtain
the regression slope coefficients and other regression
summary measures.
Multiple Regression Equation With Two

DCOVA
Two variable model
Y
Ŷ  b0  b1X1  b2 X2
X2
X1
Example:
2 Independent Variables
DCOVA
 A distributor of frozen dessert pies wants to
evaluate factors thought to influence demand.
– Dependent variable: Pie sales (units per week)

– Independent variables: Price (in $)
Advertising ($100’s)
 Data are collected for 15 weeks.

Pie Sales Example

Pie Price Advertising DCOVA
Week Sales ($) ($100s)
1 350 5.50 3.3 Multiple regression equation:
2 460 7.50 3.3
3 350 8.00 3.0
4 430 8.00 4.5
Sales = b0 + b1 (Price)
5 350 6.80 3.0 + b2 (Advertising).
6 380 7.50 4.0
7 430 4.50 3.0
8 470 6.40 3.7
9 450 7.00 3.5
10 490 5.00 4.0
11 340 7.20 3.5
12 300 7.90 3.2
13 440 5.90 4.0
14 450 5.00 3.5
15 300 7.00 2.7
Excel Multiple Regression Output

DCOVA
Regression Statistics
Multiple R 0.72213
R Square 0.52148
Adjusted R Square 0.44172
Standard Error 47.46341 Sales  306.526 - 24.975(Price)  74.131(Advertising)
Observations 15
ANOVA df SS MS F Significance F
Regression 2 29460.027 14730.013 6.53861 0.01201
Residual 12 27033.306 2252.776
Total 14 56493.333
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 306.52619 114.25389 2.68285 0.01993 57.58835 555.46404
Price -24.97509 10.83213 -2.30565 0.03979 -48.57626 -1.37392
Advertising 74.13096 25.96732 2.85478 0.01449 17.55303 130.70888

DCOVA
JMP & Minitab Multiple Regression Output
The regression equation is

Sales = 307 - 25.0 Price + 74.1 Advertising
Predictor Coef SE Coef T P

Constant 306.50 114.30 2.68 0.020
Price -24.98 10.83 -2.31 0.040
Advertising 74.13 25.97 2.85 0.014
S = 47.4634 R-Sq = 52.1% R-Sq(adj) = 44.2%
Analysis of Variance
Source DF SS MS F P
Regression 2 29460 14730 6.54 0.012
Residual Error 12 27033 2253
Total 14 56493

The Multiple Regression Equation

DCOVA
Sales = 306.526 – 24.975(Price) + 74.131(Advertising)

Where:
Sales is in number of pies per week.
Price is in $.
Advertising is in $100’s.
b1 = -24.975: Sales b2 = 74.131: Sales

will decrease, on will increase, on
average, by 24.975 average, by 74.131
pies per week for pies per week for
each $1 increase in each $100 increase
selling price, net of in advertising, net of
the effects of changes the effects of changes
due to advertising. due to price

Using The Regression Equation to Make

Predictions
DCOVA
Predict sales for a week in which the selling
price is $5.50 and advertising is $350:
Sales  306.526 - 24.975(Price)  74.131(Advertising)

 306.526 - 24.975 (5.50)  74.131 (3.5)
 428.6216
Note that Advertising is

Predicted sales in $100s, so $350 means
that X2 = 3.5.
is 428.6216 pies.
Predictions in Excel
DCOVA
Input values
<
Predicted Y value
Confidence interval for the
mean value of Y, given
these X values.
Prediction interval for an

individual Y value, given
these X values.

Predictions in JMP & Minitab DCOVA
Predicted Values for New Observations
New
Obs Fit SE Fit 95% CI 95% PI
1 428.6 17.2 (391.1, 466.1) (318.6, 538.6)
Values of Predictors for New Observations
New
Obs Price Advertising
1 5.50 3.50

The Coefficient of Multiple Determination, r2

DCOVA
 Reports the proportion of total variation in Y
explained by all X variables taken together.
SSR regression sum of squares

r 
2

SST total sum of squares

Multiple Coefficient of
Determination In Excel DCOVA
Regression Statistics
SSR 29,460.027
Multiple R 0.72213
r2    .52148
R Square 0.52148 SST 56,493.306
Adjusted R Square 0.44172
52.1% of the variation in pie sales
Standard Error 47.46341
is explained by the variation in
Observations 15
price and advertising.
ANOVA df SS MS F Significance F
Regression 2 29460.027 14730.013 6.53861 0.01201
Residual 12 27033.306 2252.776
Total 14 56493.333
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 306.52619 114.25389 2.68285 0.01993 57.58835 555.46404
Price -24.97509 10.83213 -2.30565 0.03979 -48.57626 -1.37392
Advertising 74.13096 25.96732 2.85478 0.01449 17.55303 130.70888

Multiple Coefficient of
Determination In JMP & Minitab
DCOVA
SSR 29,460.027
r 
2
  .52148
SST 56,493.306
The regression equation is

Sales = 307 - 25.0 Price + 74.1 Advertising
Predictor Coef SE Coef T P

Constant 306.50 114.30 2.68 0.020
Price -24.98 10.83 -2.31 0.040
Advertising 74.13 25.97 2.85 0.014
S = 47.4634 R-Sq = 52.1% R-Sq(adj) = 44.2%
Analysis of Variance
Source DF SS MS F P
Regression 2 29460 14730 6.54 0.012
Residual Error 12 27033 2253
Total 14 56493

Adjusted r2
DCOVA
 r2 never decreases when a new X variable is added
to the model.
– This can be a disadvantage when comparing
models.
 What is the net effect of adding a new variable?
– We lose a degree of freedom when a new X
variable is added.
– Did the new X variable add enough explanatory
power to offset the loss of one degree of freedom?

Adjusted r2
DCOVA
 Shows the proportion of variation in Y explained by all
X variables adjusted for the number of X variables
used:
 2  n  1 
r2
 1  (1  r ) 
 n  k  1 
adj

(where n = sample size, k = number of independent variables)
– Penalizes excessive use of unimportant independent

variables.
– Smaller than r2.
– Useful in comparing among models.
Is the Overall Model Significant?

DCOVA
 F Test for Overall Significance of the Model.
 Shows if there is a linear relationship between all of
the X variables considered together and Y.
 Use F-test statistic.
 Hypotheses:
H0: β1 = β2 = … = βk = 0 (no linear relationship)
H1: at least one βi ≠ 0 (at least one independent
variable affects Y)

F Test for Overall Significance

DCOVA
 Test statistic:
SSR
MSR k
FSTAT  
MSE SSE
n  k 1
where FSTAT has numerator d.f. = k and

denominator d.f.= (n – k - 1)

F Test for Overall Significance
H0: β1 = β2 = 0 Test Statistic: DCOVA

H1: β1 and β2 not both zero MSR
FSTAT   6.5386
 = .05 MSE
df1= 2 df2 = 12
Decision:
Critical Since FSTAT test statistic is
Value:
in the rejection region (p-
F0.05 = 3.885 value < .05), reject H0.
 = .05
Conclusion:
0 F There is evidence that at least one
Do not Reject H0
reject H0 independent variable affects Y.
F0.05 = 3.885
Residuals in Multiple Regression

DCOVA
Two variable model
Y Sample
Yi observation Ŷ  b0  b1X1  b2 X2
Residual =
<
ei = (Yi – Yi)
<
Yi
x2i
X2
x1i
The best fit equation is found
X1 by minimizing the sum of
squared errors, e2.
Multiple Regression Assumptions

DCOVA
Errors (residuals) from the regression model:
<
ei = (Yi – Yi)
Assumptions:
 The errors are normally distributed.
 Errors have a constant variance.
 The model errors are independent.

Residual Plots Used

in Multiple Regression
DCOVA
 These residual plots are used in multiple regression:
– Residuals vs. Yi.
<
– Residuals vs. X1i.
– Residuals vs. X2i.
– Residuals vs. time (if time series data).
Use the residual plots to check for

violations of regression assumptions.

Residual Plots For The Pie Sales Model

Residuals Versus Predicted Pie Sales Residuals Versus Price
150 150
100 100
Residuals
Residuals
50 50
0 0
-50 -50
-100 300 -100 4 5 6 7 8 9

350 400 450 500
Predicted Pie Sales Price
All these plots show

Residuals Versus Advertising
150
little or no pattern so we
100 can conclude the
Residuals
50
0 multiple regression
-50
-100 2.5
model is appropriate for
3 3.5 4 4.5 5
Advertising predicting pie sales.

Are Individual Variables Significant?

DCOVA
 Use t tests of individual variable slopes.
 Shows if there is a linear relationship between the
variable Xj and Y holding constant the effects of other
X variables.
 Hypotheses:
– H0: βj = 0 (no linear relationship)
– H1: βj ≠ 0 (linear relationship does exist
between Xj and Y)

Are Individual Variables Significant?

DCOVA
H0: βj = 0 (no linear relationship between Xj and Y)

H1: βj ≠ 0 (linear relationship does exist
between Xj and Y)
Test Statistic:
bj  0
t STAT  (df = n – k – 1)
Sb
j

Inferences about the Slope:

t Test Example
From the Excel output: DCOVA
H0: βj = 0
H1: βj  0 For Price tSTAT = -2.306, with p-value .0398.
For Advertising tSTAT = 2.855, with p-value .0145

d.f. = 15-2-1 = 12
 = .05 The test statistic for each variable falls
t/2 = 2.1788 in the rejection region (p-values < .05).
Decision:
/2=.025 /2=.025 Reject H0 for each variable.
Conclusion:
There is evidence that both
Reject H0 Do not reject H0 Reject H0
-tα/2 tα/2 Price and Advertising affect
0
-2.1788 2.1788 pie sales at  = .05.
Confidence Interval Estimate

for the Slope DCOVA
Confidence interval for the population slope βj
b j  tα / 2 Sb where t has
(n – k – 1) d.f.
j
Here, t has
(15 – 2 – 1) = 12 d.f.
Example: Form a 95% confidence interval for the effect of changes in

price (X1) on pie sales:
-24.975 ± (2.1788)(10.832)
So the interval is (-48.576, -1.374)
(This interval does not contain zero, so price has a significant effect on sales).

Testing Portions of the Multiple

Regression Model DCOVA
 Contribution of a Single Independent Variable Xj.
SSR(Xj | all variables except Xj)

= SSR (all variables) – SSR(all variables except Xj)
– Measures the contribution of Xj in explaining the

total variation in Y (SST).

Testing Portions of the Multiple

Regression Model
Contribution of a Single Independent Variable Xj, DCOVA
assuming all other variables are already included
(consider here a 2-variable model):
SSR(X1 | X2)
= SSR (all variables) – SSR(X2)
From ANOVA section of From ANOVA section of

regression for regression for
ˆ b b X b X
Y ˆ b b X
Y
0 1 1 2 2 0 2 2
Measures the contribution of X1 in explaining SST.

The Partial F-Test Statistic

DCOVA
 Consider the hypothesis test:
H0: variable Xj does not significantly improve the model after all
other variables are included
H1: variable Xj significantly improves the model after all other
variables are included
 Test using the F-test statistic:

(with 1 and n-k-1 d.f.)
SSR (X j | all variables except j)

FSTAT 
MSE
Testing Portions of Model: Example

DCOVA
Example: Frozen dessert pies
Test at the  = .05 level

to determine whether
the price variable
significantly improves
the model given that
advertising is included.


(continued)
H0: X1 (price) does not improve the model DCOVA

with X2 (advertising) included
H1: X1 does improve model
 = .05, df = 1 and 12
F0.05 = 4.75
(For X1 and X2) (For X2 only)
ANOVA ANOVA
df SS MS df SS
Regression 2 29460.02687 14730.01343 Regression 1 17484.22249
Residual 12 27033.30647 2252.775539 Residual 13 39009.11085
Total 14 56493.33333 Total 14 56493.33333


(continued)
DCOVA
ANOVA ANOVA
df SS MS df SS
Total 14 56493.33333 Total 14 56493.33333
SSR (X1 | X 2 ) 29,460.03  17,484.22

FSTAT    5.316
MSE(all) 2,252.78
Conclusion: Since FSTAT = 5.316 > F0.05 = 4.75 Reject H0;

Adding X1 does improve model.


(continued)
H0: X2 (advertising) does not improve the DCOVA

model with X1 (price) included
H1: X2 does improve model
 = .05, df = 1 and 12
F0.05 = 4.75
ANOVA ANOVA
df SS MS df SS
Total 14 56493.33333 Total 14 56493.33333


DCOVA
ANOVA ANOVA
df SS MS df SS
Total 14 56493.33333 Total 14 56493.33333
SSR (X 2 | X1 ) 29,460.03  11,100.44

FSTAT    8.150
MSE(all) 2,252.78
Conclusion: Since FSTAT = 8.150 > F0.05 = 4.75 Reject H0;

Adding X2 does improve model.

Relationship Between Test Statistics

DCOVA
 The partial F test statistic developed in this section and the t
test statistic are both used to determine the contribution of an
independent variable to a multiple regression model.
 The hypothesis tests associated with these two statistics
always result in the same decision (that is, the p-values are
identical).
t 2
STAT  FSTAT

Coefficients of Partial Determination for 2

variable model DCOVA
SSR (X1 |X 2 )
r2

Y1.2
SST SSR(X1 and X 2 )  SSR(X 2 |X 1 )
 Measures the proportion of variation in Y explained by X1
while controlling for (holding constant) X2.
SSR (X 2 |X1 )
r2

Y2.1
SST SSR(X1 and X 2 )  SSR(X 1 |X 2 )
 Measures the proportion of variation in Y explained by X2
while controlling for (holding constant) X1.

Coefficients of Partial Determination for Pie

Sales Data Using JMP Output DCOVA
11,975.804
2
rY1.2   0.276
54 ,493.333 29,460.027  18,359.589
18,359.589
2
rY2.1   0.496
54 ,493.333 29,460.027  11,975.804

Using Dummy Variables

DCOVA
 A dummy variable is a categorical independent

variable with two levels:
– yes or no, on or off, male or female.
– coded as 0 or 1.
 Assumes the slopes associated with numerical
independent variables do not change with the value
for the categorical variable.
 If more than two levels, the number of dummy
variables needed is (number of levels - 1).

Dummy-Variable Example
(with 2 Levels)
DCOVA
Ŷ  b0  b1X1  b2 X2
Let:
Y = pie sales
X1 = price
X2 = holiday (X2 = 1 if a holiday occurred during the week).
(X2 = 0 if there was no holiday that week).

Dummy-Variable Example
(with 2 Levels)
DCOVA
Ŷ  b0  b1X1  b2 (1)  (b0  b2 )  b1X1 Holiday
Ŷ  b0  b1X1  b2 (0)  b0  b1X1 No Holiday
Y (sales) Different Same

intercept slope
b0 + b2 If H0: β2 = 0 is
b0 rejected, then
“Holiday” has a
significant effect
on pie sales.
X1 (Price)
Dummy-Variable Example Excel, JMP, & Minitab Output

DCOVA

Interpreting the Dummy Variable Coefficient (with 2

Levels)
ˆ  548.1 - 26.1(Price)  90.1(Holiday)
Sales
Sales: number of pies sold per week
Price: pie price in $
1 If a holiday occurred during the week
Holiday:
0 If no holiday occurred
b2 = 90.1: on average, sales were 90.1 pies greater

in weeks with a holiday than in weeks without a
holiday, given the same price.

Dummy-Variable Models
(more than 2 Levels)
DCOVA
 The number of dummy variables is one less than

the number of levels.
 Example:
Y = house price ; X1 = square feet.
 If style of the house is also thought to matter:

Style = ranch, split level, colonial.
Three levels, so two dummy

variables are needed.
Dummy-Variable Models
(more than 2 Levels) (continued)
DCOVA
 Example: Let “colonial” be the default category, and let X2
and X3 be used for the other two categories:
Y = house price
X1 = square feet
X2 = 1 if ranch, 0 otherwise
X3 = 1 if split level, 0 otherwise
The multiple regression equation is:

Ŷ  b0  b1X1  b2 X2  b3 X3
Interpreting the Dummy Variable Coefficients

(with 3 Levels)
DCOVA
Consider the regression equation:
Ŷ  20.43  0.045X 1  23.53X 2  18.84X 3
For a colonial: X2 = X3 = 0
With the same square feet, a
Ŷ  20.43  0.045X1 ranch will have an estimated
average price of 23.53
For a ranch: X2 = 1; X3 = 0 thousand dollars more than a
colonial.
Ŷ  20.43  0.045X1  23.53
With the same square feet, a
split-level will have an
For a split level: X2 = 0; X3 = 1 estimated average price of
Ŷ  20.43  0.045X1  18.84 18.84 thousand dollars more
than a colonial.
Interaction Between Independent

Variables
DCOVA
 Hypothesizes interaction between pairs of X
variables.
– Response to one X variable may vary at different
levels of another X variable.
 Contains two-way cross product terms.
Ŷ  b0  b1X1  b2 X2  b3 X3
–
 b0  b1X1  b2 X2  b3 (X1X2 )
Effect of Interaction
DCOVA
 Given: Y  β0  β1X1  β2 X2  β3 X1X2  ε
 Without interaction term, effect of X1 on Y is

measured by β1.
 With interaction term, effect of X1 on Y is measured
by β1 + β3 X2.
 Effect changes as X2 changes.

Interaction Example
DCOVA
Suppose X2 is a dummy variable and the estimated
regression equation is Ŷ = 1 + 2X1 + 3X2 + 4X1X2
Y
12
X2 = 1:
8 Y = 1 + 2X1 + 3(1) + 4X1(1) = 4 + 6X1
4 X2 = 0:
Y = 1 + 2X1 + 3(0) + 4X1(0) = 1 + 2X1
0
X1
0 0.5 1 1.5
Slopes are different if the effect of X1 on Y depends on X2 value
Example of Interaction Term

 Consider example of asking price of homes from
pages 560 – 562.
 Dependent variable is Asking Price of Homes.
 Independent variables are Living Space and whether
or not the house has a fireplace.
 In the model with no interaction you are assuming
the effect of Living Space on Asking Price is the
same whether or not the house has a fireplace.
 If this is not true, the model needs an interaction
term.

Excel, JMP, & Minitab Output From Interaction Model
Interaction is not significant.
Effect of Living Space on

Asking Price does not
depend on whether or not
the house has a fireplace.

Evaluating A Model With Several Interactions

Simultaneouslly
 In a model with multiple interaction terms, can use a partial F test to evaluate
their contribution.
 Consider example 14.4 where:
– Y = monthly heating oil consumption
– X1 = temperature
– X2 = insulation
– X3 = 1 if house is a ranch, = 0 otherwise
– X4 = X1 * X2
– X5 = X1 * X3
– X6 = X2 * X3
 The regression model:
Yi   0   1 X 1i   2 X 2i   3 X 3i   4 X 4i   5 X 5i   6 X 6 i   i


Simultaneouslly (Con’t)
Yi   0   1 X 1i   2 X 2i   3 X 3i   4 X 4i   5 X 5i   6 X 6 i   i
• To decide if any of the interactions are significant we test:

H 0 :  4   5   6  0 vs
H 1 :  4 and/or  5 and/or  6  0
• Using a partial F test with m = 3 (the three parameters).
[SSR(all)  SSR (all except new set of m variables)] / m

FSTAT 
MSE(all)
(where FSTAT has m and n-k-1 d.f.)

Excel, JMP, & Minitab Output


Simultaneouslly (Con’t) DCOVA
H 0 :  4   5   6  0 vs
H 1 :  4 and/or  5 and/or  6  0
[SSR(all)  SSR (all except new set of m variables)] / m

FSTAT 
MSE(all)
 [( 234 ,510.5818  233,406.9094 ) / 3 ] / 203.0809  1.8115
Since FSTAT  1.8115  F0.05 ,8 ,3  4.07

We conclude the interactions do add significant value.

Logistic Regression
DCOVA
 Used when the dependent variable Y is binary (i.e.,
Y takes on only two values).
 Examples:
– Customer prefers Brand A or Brand B.
– Employee chooses to work full-time or part-time.
– Loan is delinquent or is not delinquent.
– Person voted in last election or did not.
 Logistic regression allows you to predict the
probability of a particular categorical response.
Logistic Regression
DCOVA
(continued)
 Logistic regression is based on the odds ratio,

which represents the probability of an event of
interest occurring compared with the probability of
an event of interest not occurring.
Probability of an event of interest

Odds ratio =
1 - Probability of an event of interest
 The logistic regression model is based on the natural

log of this odds ratio.
Logistic Regression
(continued)
DCOVA
Logistic Regression Model:
ln(odds ratio)  β 0  β1X1i  β 2 X 2i      β k X ki  ε i
Where k = number of independent variables in the model

εi = random error in observation i
Logistic Regression Equation:
ln(estimated odds ratio)  b 0  b1X1i  b 2 X 2i      b k X ki

Estimated Odds Ratio and

Probability of Success DCOVA
 Once you have the logistic regression equation,

compute the estimated odds ratio:
Estimated odds ratio  e ln(estimat ed odds ratio)
 The estimated probability of an event of interest is
estimated odds ratio

Estimated probabilit y of an event of interest 
1  estimated odds ratio

Logistic Regression Example DCOVA

A sales & marketing manager for a credit card company
wants to study which existing standard card holders are
more likely to upgrade to the company’s platinum card.
A sample of 30 standard card holders were targeted in a

pilot campaign and there were three variables tracked:
1. Y, whether the user upgraded (0 = no, 1 = yes)

2. X1, the prior year’s charges in thousands of $
3. X2, whether the user ordered additional cards,
(0 = no, 1 = yes).
Can this study help the manager determine which

customers to target with the campaign?
Excel, JMP, & Minitab Logistic Regression Results

Interpretation of Logistic Regression

DCOVA
Results
•b0 = –6.9394. This means that for a credit cardholder who did not charge any
purchases last year and who does not have additional cards, the estimated natural
logarithm of the odds ratio of purchasing the premium card is –6.9394.
•b1 = 0.1395. This means that holding constant the effect of whether the credit
cardholder has additional cards for members of the household, for each increase of
$1,000 in annual credit card spending, the estimated natural logarithm of the odds
ratio of purchasing the premium card increases by 0.1395. Therefore, cardholders
who charged more in the previous year are more likely to upgrade to a premium
card.
•b2 = 2.7743. This means that holding constant the annual credit card spending, the
estimated natural logarithm of the odds ratio of purchasing the premium card
increases by 2.7743 for a credit cardholder who has additional cards for members
of the household compared with one who does not have additional cards.
Therefore, cardholders possessing additional cards for other members of the
household are much more likely to upgrade to a premium card.

Chapter Summary
In this chapter we discussed:
 How to develop a multiple regression model.
 How to interpret the regression coefficients.
 How to determine which independent variables to include in
the regression model.
 How to determine which independent variables are most
important in predicting a dependent variable
 How to use categorical independent variables in a regression
model.
 How to use logistic regression to predict a categorical
dependent variable.

Chapter 14-Introduction To Multiple Regression

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ĐẠI HỌC FPT CẦN THƠ

Introduction to Multiple Regression

Dr. Tran Quoc Duy Applied Statistics for Business

Dr. Tran Quoc Duy Applied Statistics for Business

Dr. Tran Quoc Duy Applied Statistics for Business

The Multiple Regression Model With k

Y-intercept Population slopes Random Error

Dr. Tran Quoc Duy Applied Statistics for Business

Dr. Tran Quoc Duy Applied Statistics for Business

Multiple Regression Equation

The coefficients of the multiple regression model are

Multiple regression equation with k independent variables:

Multiple Regression Equation With Two

– Dependent variable: Pie sales (units per week)

 Data are collected for 15 weeks.

Dr. Tran Quoc Duy Applied Statistics for Business

Pie Sales Example

Excel Multiple Regression Output

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Dr. Tran Quoc Duy Applied Statistics for Business

The regression equation is

Predictor Coef SE Coef T P

S = 47.4634 R-Sq = 52.1% R-Sq(adj) = 44.2%

Dr. Tran Quoc Duy Applied Statistics for Business

The Multiple Regression Equation

Sales = 306.526 – 24.975(Price) + 74.131(Advertising)

b1 = -24.975: Sales b2 = 74.131: Sales

Dr. Tran Quoc Duy Applied Statistics for Business

Using The Regression Equation to Make

Sales  306.526 - 24.975(Price)  74.131(Advertising)

Note that Advertising is

Prediction interval for an

Dr. Tran Quoc Duy Applied Statistics for Business

Predictions in JMP & Minitab DCOVA

Predicted Values for New Observations

Values of Predictors for New Observations

Dr. Tran Quoc Duy Applied Statistics for Business

The Coefficient of Multiple Determination, r2

SSR regression sum of squares

Dr. Tran Quoc Duy Applied Statistics for Business

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Dr. Tran Quoc Duy Applied Statistics for Business

The regression equation is

Predictor Coef SE Coef T P

S = 47.4634 R-Sq = 52.1% R-Sq(adj) = 44.2%

Dr. Tran Quoc Duy Applied Statistics for Business

Dr. Tran Quoc Duy Applied Statistics for Business

– Penalizes excessive use of unimportant independent

Is the Overall Model Significant?

Dr. Tran Quoc Duy Applied Statistics for Business

F Test for Overall Significance

where FSTAT has numerator d.f. = k and

Dr. Tran Quoc Duy Applied Statistics for Business

F Test for Overall Significance

H0: β1 = β2 = 0 Test Statistic: DCOVA

Residuals in Multiple Regression

Multiple Regression Assumptions

Dr. Tran Quoc Duy Applied Statistics for Business

Residual Plots Used

Use the residual plots to check for

Dr. Tran Quoc Duy Applied Statistics for Business

Residual Plots For The Pie Sales Model

-100 300 -100 4 5 6 7 8 9