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A SIMPLE GUIDE TO REGRESSION

Regression Analysis, in general sense, means the estimation or prediction of the unknown value of one variable from the known value of the other variable.

The Regression Analysis confined to the study of only two variables at a time is termed as Simple Regression. But quite often the values of a particular phenomenon may be affected by multiplicity of causes. The Regression analysis for studying more than two variables at a time is known as Multiple Regression.

In Regression Analysis there are two types of variables. The variable whose value is influenced or is to be predicted is called dependent variable. The variable which influences the values or used for prediction is called independent variable. The Regression Analysis independent variable is known as regressor or predictor or explanator while the dependent variable is also known as regressed or explained variable.

If the given bivariate data are plotted on a graph, the points so obtained on the diagram will more or less concentrate around a curve, called the ³Curve of Regression´. The mathematical equation of the Regression curve, is called the Regression Equation. If the regression curve is a straight line, we say that there is linear regression between the variables under study. If the curve of regression is not a straight line, the regression is termed as curved or non-linear regression.

Line of regression is the lines which gives the best estimate of one variable for any given value of the other variable. In case of two variable say x & y, we shall have two regression equations; x on y and the other is y on x. Line of regression of y on x is the line which gives the best estimate for the value of y for any specified value of x. Line of regression of x on y is the line which gives the best estimate for the value of x for any specified value of y.

(y-y) = (x-x)

r.

x

y

LINES OF REGRESSION OF x on y

(x-x) = (y-y) r.

y x

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When r=0 i.e., when x & y are uncorrelated, then the lines of regression of y on x, and x on y are given as: y ± y = 0 and x ± x = 0. The lines are perpendicular to each other. When r=+1 then the two lines coincide. If the value of r is significant, we can use the lines of regression for estimation and prediction. If r is not significant, then the linear model is not a good fit and hence the line of regression should not be used for prediction.

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**bxy is the Coefficient of regression of x on y. byx is the Coefficient of regression of y on x.
**

r.

x y

bxy =

bxy =

Cov (x,y)

y 2

byx =

r. y x

byx =

Cov (x,y)

x 2

(x-x) = bxy (y-y)

(y-y) = byx (x-x)

dx.dy

dx.dy n xy - x. y n xy - x. y bxy = bxy= 2 byx= 2 2 2 dy n y -( y) n x -( x)2

byx =

dx2

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The correlation coefficient is the Geometric Mean between the Regression Coefficients i.e., r2= bxy byx The sign to be taken before the square root is same as that of regression coefficients. If one of the regression coefficient is greater than one, then the other must be less than one.

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The AM of the modulus value of regression coefficients is greater than the GM of the modulus value of the Correlation Coefficient. Regression coefficients are independent of change of origin but not of scale.

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X 91 97 105 121 67 124 51 73 111 57 900

Y 71 75 69 97 70 91 39 61 80 47 700

dx=X-X 1 7 18 31 -23 34 -39 -17 21 -33 0

dy=Y-Y 1 5 -1 27 0 21 -31 -9 10 -23 0

dx2 1 49 324 961 529 1156 1521 289 441 1089 6360

dy2 1 25 1 729 0 441 961 81 100 529 2868

dxdy 1 35 -18 837 0 714 1209 153 210 759 3900

dx.dy

dx.dy

bxy =

byx =

dy2

dx2

bxy =

3900

2868

1.361

byx =

3900

6360

0.6132

(x-x) = bxy (y-y) (x-90) = 1.361(y-70) x=1.361y - 5.27

(y-y) = byx (x-x) (y-70) = 0.6132 (x-90) y=0.6132x + 14.812

The data about the sales & advertisement expenditure of a firm is given below: Sales Advertmnt Expend. Means 40 6 Standard Deviations 10 1.5 Coefficient of Correlation is 0.9 1. Estimate the likely sales for a proposed advertisement expenditure of Rs. 10 crores. 2. What should be the advertisement expenditure if the firm proposes a sales target of 60 crores of rupees?

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(x-x) = bxy (y-y) bxy = r.

x y

(y-y) = byx (x-x) byx = r. y x (y-6) = (0.9*1.50/10) (x-40) y = 0.135x+0.6 y = 0.135*60+0.6 y =8.7

(x-40) = (0.9*10/1.5) (y-6) x = 6y+4 x = 6*10+4 x = 64

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Point out the consistency, if any, in the following statement:

**³The Regression Equation of y on x is 2y+3x=4 and the correlation coefficient between x & y is 0.8´
**

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By using the following data, find out the two lines of regression and from them compute the Karl-Pearson¶s coefficient of correlation.

X=25 ; Y=300; XY=7900; X2=6500; Y2=10000; n=10

bxy =

n xy - x. y n y2 -( y)2

byx =

n xy - x. y n x2 -( x)2

10*7900 ± 250*300 bxy = 10*10000 -(300)2 0.4

10*7900 ± 250*300 byx = 10*6500 -(250)2 1.6

rxy2

bxy* bxy

rxy2

1.6* 0.4

rxy

0.8

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Find the two regression coefficients and hence the r .

**n=5; X=10; Y=20; (X-4)2=100; (Y-10)2=160; (X-4)(Y-10)=80
**

ANSWER:

U=X-4; U=X-4=6; U= nU = 30. Similarly V=50

byx=

n UV - U. V n U2 -( U)2

= (11 4)

byx=

n UV - U. V n V2 -( V)2

= (11 17)

5*80 ± 30*50 byx= 5*100 -(30)2

5*80 ± 30*50 byx= 5*160 -(50)2

r = ¥(11/4)(11/17) = 1.33 ( it is impossible)

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