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Understanding Linear Regression Basics

Linear Regression is a predictive modeling technique that establishes a linear relationship between a dependent variable and one or more independent variables. It involves assumptions such as linearity, independence, homoscedasticity, and normality, and can be applied in various fields like business, finance, and healthcare. However, it has limitations including non-linearity, the influence of outliers, and multicollinearity among predictors.

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16 views8 pages

Understanding Linear Regression Basics

Linear Regression is a predictive modeling technique that establishes a linear relationship between a dependent variable and one or more independent variables. It involves assumptions such as linearity, independence, homoscedasticity, and normality, and can be applied in various fields like business, finance, and healthcare. However, it has limitations including non-linearity, the influence of outliers, and multicollinearity among predictors.

Uploaded by

amithya288
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Linear Regression

Presented By

AMITHYA SANTHOSH

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Understanding the Linear Regression Model
What is it? Key Components

Linear Regression predicts a dependent variable's value based Independent variables (predictors) influence the dependent
on the relationship with one or more independent variables. It variable (outcome). The regression equation describes the
assumes a linear relationship between these variables. The relationship between them. The slope and intercept
model aims to find the line of best fit that minimizes the determine the line's shape.
distance between data points and the line.

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Assumptions of Linear
Regression
Linearity Independence
The relationship between Data points should be
independent and dependent independent of each other.
variables should be linear.

Homoscedasticity Normality
The variance of errors should Errors should be normally
be constant across all values distributed.
of independent variables.

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Simple Linear Regression: Fitting the Model

Data Preparation
1 Gather relevant data and ensure it meets the assumptions.

Model Estimation
2 Use statistical software to estimate the coefficients and intercept of the
regression equation.

Model Interpretation
3 Analyze the coefficients to understand the relationship
between the variables.

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EQUATIONS
y = mx + c

Slope: 𝑚 = 𝑁 ( ∑ 𝑥 𝑦 ) − ( ∑ 𝑥 ) ( ∑ 𝑦 )
𝑁 ( ∑ 𝑥 ² ) − ( ∑ 𝑥 )²

Intercept : 𝑐 = ( ∑ 𝑦 ) − 𝑚 ( ∑ 𝑥 )
𝑁

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Multiple Linear Regression:
Handling Multiple Variables

Multiple Predictors Complex Relationships


Extends the model to incorporate Enables analyzing the effects of
multiple independent variables. different variables on the outcome.

Model Complexity
Requires careful consideration of
variable interactions and model
selection.

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Applications of Linear Regression: Predictive
Modeling

Business
1
Predicting sales, customer churn, and market trends.

Finance
2
Forecasting stock prices, analyzing investment performance.

Healthcare
3
Estimating patient risk, predicting disease progression.

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Limitations and Considerations
in Linear Regression

1 2
Non-linearity Outliers
Linear Regression may not accurately Outliers can heavily influence model
capture non-linear relationships. results.

3
Multicollinearity
High correlation between independent
variables can lead to unstable results.
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