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Multiple Regression Analysis and Modeling

This document discusses multiple regression analysis and modeling. It explains that multiple regression examines relationships between a dependent variable and multiple independent variables. It determines how much variation in the dependent variable can be explained by the independent variables and predicts dependent variable values. The document also discusses determining the regression equation, assumptions of the classical linear regression model, and calculating R-squared and partial correlations.

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63 views12 pages

Multiple Regression Analysis and Modeling

This document discusses multiple regression analysis and modeling. It explains that multiple regression examines relationships between a dependent variable and multiple independent variables. It determines how much variation in the dependent variable can be explained by the independent variables and predicts dependent variable values. The document also discusses determining the regression equation, assumptions of the classical linear regression model, and calculating R-squared and partial correlations.

Uploaded by

ginish12
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPSX, PDF, TXT or read online on Scribd
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MULTIPLE REGRESSION ANALYSIS AND

MODELING

SANTOSH KOIRALA
 To understand regression analysis
 Finding multiple regression equation
 Making inference about the population
parameters
 Assumptions of Classical linear regression
model
Regression analysis examines associative relationships
between a metric dependent variable and one or more
independent variables in the following ways:
 Determine whether the independent variables
explain a significant variation in the dependent
variable: whether a relationship exists.
 Determine how much of the variation in the
dependent variable can be explained by the
independent variables: strength of the relationship.
 Determine the structure or form of the relationship:
the mathematical equation relating the independent
and dependent variables.
 Predict the values of the dependent variable.
 Control for other independent variables when
evaluating the contributions of a specific variable or
set of variables.
 Regression analysis is concerned with the nature and
degree of association between variables and does
not imply or assume any causality.
(continued)
y
yi  
SSE = (y - y )2 y
_
SST = (y - y)2

y  _
_ SSR = (y - y)2 _
y y

Xi x
(continued)

 SST = total sum of squares


◦ Measures the variation of the y values around
their mean y
 SSE = error sum of squares
◦ Variation attributable to factors other than the
relationship between x and y
 SSR = regression sum of squares
◦ Explained variation attributable to the relationship
between x and y
SSy = SSreg + SSres

where
n
SS y =  (Y i - Y )2
i =1
n 2
SS reg =  (Y i - Y )
i =1
n 2
SS res =  (Y i - Y i )
i =1
The strength of association is measured by the square of the multiple
correlation coefficient, R2, which is also called the coefficient of
multiple determination.

SS reg
R2 =
SS y

R2 is adjusted for the number of independent variables and the sample


size by using the following formula:

Adjusted R2 =R 2 k(1 - R 2 )
-
n-k-1
A partial correlation coefficient measures the
association between two variables after
controlling for,
or adjusting for, the effects of one or more
additional
variables.
rx y - (rx z ) (ry z )
rx y . z =
1 - rx2z 1 - ry2z

 Partial correlations have an order associated


with them. The order indicates how many
variables are being adjusted or controlled.
 The simple correlation coefficient, r, has a
zero-order, as it does not control for any
additional variables while measuring the
association between two variables.
 A dummy variable is a categorical
explanatory variable with two levels:
◦ yes or no, on or off, male or female
◦ coded as 0 or 1
 Regression intercepts are different if the
variable is significant
 Assumes equal slopes for other variables
 If more than two levels, the number of
dummy variables needed is (number of
levels - 1)
 Different Intercepts, same slope

Ŷ  b 0  b1 X1  b 2 (1)  (b 0  b 2 )  b1 X1 male

Ŷ  b 0  b1 X1  b 2 (0)  b 0  b 1 X1 Female

Y (Salary)
If H0: β2 = 0 is
b0 + b 2 rejected, then
“salary between
b0 male and female
employees are
significantly
different.

Months of employment (X1)


 Model is linear is parameters
 Independent variables are assumed to be non
random.
 For given value of Xi s expected value of
disturbance term is 0
 i.e. E(ui /Xi)=0
 For a given values of Xi s the variance is
constant i.e. Var(ui /Xi)= σ
 There is no exact linear relationship between
the independent variables.

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