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Module 3
Regression
Dependent variable
B1 = slope
= ∆y/ ∆x
b0 (y intercept)
Observation: y
Zero
Independent variable (x)
The function will make a prediction for each observed data point.
^
The observation is denoted by y and the prediction is denoted by y.
Simple Linear Regression
Prediction error: ε
Observation: y
Prediction: y^
Zero
y=^
y+ε
Actual = Explained + Error
Regression
Dependent variable
Mathematically,
^ 2
SSR = ∑ ( y – y ) (measure of explained variation)
^
SSE = ∑ ( y – y ) (measure of unexplained variation)
2
SST = SSR + SSE = ∑ ( y – y ) (measure of total variation in y)
The Coefficient of Determination
2 SSR SSR
R = =
SST SSR + SSE
The value of R 2 can range between 0 and 1, and the higher its value
the more accurate the regression model is. It is often referred to as a
percentage.
Standard Error of Regression
Standard Error =
√ SSE
n-k
y=A+β*x+ε
β is the per unit change in the dependent variable for each unit
change in the independent variable. Mathematically:
∆y
β=
∆x
Multiple Linear Regression
1 1 2 2
y = A + β X + β X + … + β k Xk + ε
Example table of
Correlations
Y X1 X2
Y 1.000
X1 0.802 1.000
X2 0.848 0.578 1.000
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.982655 Y = B0 + B1 X1 + B2X2 + B3X3 - - - +/- Error
R Square 0.96561 Total = Estimated/Predicted +/- Error
Adjusted R Square 0.959879
Standard Error 26.01378
Observations 15
ANOVA
df SS MS F Significance F
Regression 2 228014.6 114007.3 168.4712 1.65E-09
Residual 12 8120.603 676.7169
Total 14 236135.2
Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%
Intercept 562.151 21.0931 26.65094 4.78E-12 516.1931 608.1089
Temperature -5.436581 0.336216 -16.1699 1.64E-09 -6.169133 -4.704029
Insulation -20.01232 2.342505 -8.543127 1.91E-06 -25.1162 -14.90844