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Y ȕ0 ȕ1 X 1 ȕ2 X 2 ! ȕk X k İ
N(0,sig^2)
The coefficients of the population model are estimated b0,…,bk are values that minimize the sum of the
using sample data squared errors (SSE) :
SSE ¦ (Y Yˆ )
i i
2
¦ (Y (b
i 0 b1X1i ... bk Xki ))2
Sample
intercept Sample (partial) slopes
Predicted Y
Normal equations :
Yˆ b0 b1 X 1 b2 X 2 ! bk X k ¦e i 0
¦X e 1i i 0
#
¦X e ki i 0
Example:
ANOVA for Multiple Regression Two Independent Variables
[AQ
A distributor of frozen desert pies wants to
SST SSR SSE evaluate factors thought to influence demand
Total Sum of Regression Sum Error Sum of Y : Pie sales (units/week)
Squares of Squares Squares
X’s : Price (in $)
¦ (Y Y )
i
2
¦ (Yˆ Y )
i
2
¦ (Y Yˆ )
i i
2 Advertising ($100’s)
SSR
R2
SST
Test statistic:
MSR SSR / k
F= = ~ F(k , n k 1)
MSE SSE / (n k 1)
D = .05
Conclusion:
0 Reject H0
F There is evidence that at least one
independent variable affects Y
F2,12,0.05 = 3.885
Using The Equation to Make
The Multiple Regression Equation Predictions
Predict sales for a week in which the selling
Sales 306.526 - 24.975(Price) 74.131(Adv ertising)
price is $5.50 and advertising is $350:
where
Sales is in number of pies per week
Price is in $ Sales 306.526 - 24.975(Price) 74.131(Adv ertising)
Advertising is in $100’s.
b1 = -24.975: sales b2 = 74.131: sales will 306.526 - 24.975 (5.50) 74.131 (3.5)
will decrease, on increase, on average,
average, by 24.975 by 74.131 pies per 428.62
pies per week for week for each $100
each $1 increase in increase in Note that Advertising is
selling price, when advertising, when Predicted sales is in $100’s, so $350
advertising is fixed price is fixed 428.62 pies means that X2 = 3.5
Hypotheses: H0: ȕj = 0
H0: ȕj = 0 (Xj is useless in the presence of H1: ȕj 0
other variables)
Test Statistic:
H1: ȕj 0 (Xj is useful)
bj 0 (df = n – k – 1)
t
se(b j )
Are Individual Variables
Significant? Partial F Tests
(continued)
ANOVA
ANOVA
df SS MS
df SS
Regression 2 29460.03 14730.01
Regression 1 17484.22
Residual 13 39009.11 Residual 12 27033.31 2252.78
F
>SSR(X ,X1 2
) SSR(X2 )@ y 1
MSE(X1,X2 )
29460.03 17484.22
2252.78
5.316
H0 : Removing X1 does not reduce the power of the model (X1 and X2) (X2)
when X2 is also included ( E1 0)
ANOVA ANOVA
df SS MS df SS
X 3 1 2 X 2 3 X1 n : 13 109.2 11 55 9 22
102.7 3 71 17 6
X 2 4X3 72.5 1 31 22 44
93.1 2 54 18 22
115.9 21 47 4 26
83.8 1 40 23 34
113.3 11 66 9 12
109.4 10 68 8 12
!%()6QRWHV
Hald Cement Data : Forward
Selection Criteria of Model Selection