Chapter 9: Regression and

Correlation
Dr. Jameel Ahmed
Institute of Management Sciences
University of Balochistan, Quetta
Introduction
• Relationship between variables
– Every day, managers make personal and professional
decisions that are based on predictions of future events.
– To make these forecasts, they rely on the
relationship(intuitive and calculated) between what is
already known and what is to be estimated.
– If decision makers can determine how the known is related
to the future event, they can aid the decision-making
process considerably.
– That is the subject of this chapter, how to determine the
relationship between variables.
Introduction
• Difference between Chi-square and
Regression/Correlation
– Chi-square tests of independence is used to
determine whether a statistical relationship existed
between two variables.
• The chi-square test tells us whether there is such a
relationship, but it does not tell us what the relationship is.
– Regression and correlation analyses show us how to
determine both the nature and the strength of a
relationship between two variables.
Regression, Regression Analysis, Regression
Line
• Regression is the general process of predicting one variable
from another by statistical means, using previous data.
• In regression analysis, we shall develop an estimating
equation – that is, a mathematical formula that relates the
known variables to the unknown variables.
• Regression line is a line fitted to a set of data points to
estimate the relationship between two variables.
• Least-square method is a technique for fitting a straight line
through a set of points in such a way that the sum of the
squared vertical distance from the n points to the line is
minimized.
 Types of Relationships
• Regression and correlation analyses are
based on the relationship, or association
between two (or more) variables.
• The know variable (or variables) is called the
independent variable(s).
• The variable we are trying to predict the
dependent variable.
 Estimation Using the Regression Line

• Method of Least Squares

• The Estimating Line

• The Slope of the Best-Fitting Regression Line

• Y-intercept of the Best-Fitting Regression Line