Journal material -3

Linear regression is a statistical technique that examines the linear relationship

between a dependent variable and one or more independent variables.

 Dependent Variable (aka response/outcome variable): This is the variable

of your interest and wanted to predict based on the Independent
variable(s).
 Independent Variable (aka explanatory/predictor variable): Is/are the
variable(s) on which response variable is depend. This means these are the
variables using which response variables can be predicted.
Linear relationship means the change in an independent variable(s) causes a
change in the dependent variable.

There are basically two types of linear relationships as well.

1. Positive Linear Relationship: When the independent variable increases, the

dependent variable increases too.
2. Negative Linear Relationship: When the independent variable increases,
the dependent variable decreases.
There are two basic ways to perform linear regression in excel using:

 Regression tool through Analysis ToolPak

 Scatter chart with a trendline
There is actually one more method which is using manual formula’s to calculate
linear regression. But why should you go for it when excel does calculations for
you?

Therefore, we are going to talk about the two methods discussed above only.

Suppose you have data on the height and weight of 10 individuals. If you plot this
information through a chart, let’s see what it gives.

We have a mathematical expression for linear regression as below:

Y = aX + b + ε
Where,

 Y is a dependent variable or response variable.

 X is an independent variable or predictor.
 a is the slope of the regression line. This represents that when X changes,
there is a change in Y by “a” units.
 b is intercepting. It is the value Y takes when the value of X is zero.
 ε is the random error term. It occurs because Y’s predicted value will never
be exactly the same as the actual value for a given X. We don’t need to
worry about this error term as some software do the calculation of this
error term in the backend for you. Excel is one of that software.
In that case, the equation becomes,
Y = aX + b
Which can be represented as:
Weight = a*Height + b

Take print out of output which you have practiced