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Least Square Regression

The least squares regression method finds the best fit line that minimizes the sum of the squared errors between the predicted dependent variable values and the actual dependent variable values. It works by calculating the slope and y-intercept of the line that best fits the data based on minimizing this error. An example is provided that walks through calculating the slope, y-intercept, and line of best fit equation for a dataset on t-shirt sales and prices to predict future sales.

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48 views15 pages

Least Square Regression

The least squares regression method finds the best fit line that minimizes the sum of the squared errors between the predicted dependent variable values and the actual dependent variable values. It works by calculating the slope and y-intercept of the line that best fits the data based on minimizing this error. An example is provided that walks through calculating the slope, y-intercept, and line of best fit equation for a dataset on t-shirt sales and prices to predict future sales.

Uploaded by

swetank.raut22
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Least Square Regression

Tushar B. Kute,
http://tusharkute.com
Least Square Regression

• The least-squares regression method is a


technique commonly used in Regression
Analysis.
• It is a mathematical method used to find the
best fit line that represents the relationship
between an independent and dependent
variable.
• To understand the least-squares regression
method lets get familiar with the concepts
involved in formulating the line of best fit.
What is line of best fit ?

• Line of best fit is drawn to represent the relationship


between 2 or more variables. To be more specific, the best
fit line is drawn across a scatter plot of data points in order
to represent a relationship between those data points.
• Regression analysis makes use of mathematical methods
such as least squares to obtain a definite relationship
between the predictor variable (s) and the target variable.
• The least-squares method is one of the most effective
ways used to draw the line of best fit. It is based on the
idea that the square of the errors obtained must be
minimized to the most possible extent and hence the name
least squares method.
Visualizing

• If we were to plot the best fit line that shows the depicts the
sales of a company over a period of time, it would look
something like this:

• Notice that the line is as close as possible to all the scattered


data points. This is what an ideal best fit line looks like.
Visualizing
Calculate line of best fit

• To start constructing the line that best depicts the relationship


between variables in the data, we first need to get our basics right.
Take a look at the equation below:

• Surely, you’ve come across this equation before. It is a simple


equation that represents a straight line along 2 Dimensional data,
i.e. x-axis and y-axis. To better understand this, let’s break down the
equation:
y: dependent variable
m: the slope of the line
x: independent variable
c: y-intercept
Calculate line of best fit

• Step 1: Calculate the slope ‘m’ by using the


following formula:

• Step 2: Compute the y-intercept (the value of y


at the point where the line crosses the y-axis):

• Step 3: Substitute the values in the final


equation:
Example

• Consider an example. Tom who is the owner of a retail


shop, found the price of different T-shirts vs the number
of T-shirts sold at his shop over a period of one week.
• He tabulated this like shown below:
Step-1

• Let us use the concept of least squares regression


to find the line of best fit for the above data.
• Step 1: Calculate the slope ‘m’ by using the
following formula:

• After you substitute the respective values, m =


1.518 approximately.
Step-2

• Step 2: Compute the y-intercept value

• After you substitute the respective values, c = 0.305


approximately.
Step-3

• Step 3: Substitute the values in the final


equation

• Once you substitute the values, it should look


something like this:
Predicting

• Let’s construct a graph that represents the y=mx + c line of


best fit:

• Now Tom can use the above equation to estimate how


many T-shirts of price $8 can he sell at the retail shop.

y = 1.518 x 8 + 0.305 = 12.45 T-shirts


Summary

• The least squares regression method works by minimizing the sum of


the square of the errors as small as possible, hence the name least
squares. Basically the distance between the line of best fit and the
error must be minimized as much as possible.
• A few things to keep in mind before implementing the least squares
regression method is:
– The data must be free of outliers because they might lead to a
biased and wrongful line of best fit.
– The line of best fit can be drawn iteratively until you get a line
with the minimum possible squares of errors.
– This method works well even with non-linear data.
– Technically, the difference between the actual value of ‘y’ and the
predicted value of ‘y’ is called the Residual (denotes the error).
Example:

• Go practical...
Thank you
This presentation is created using LibreOffice Impress 5.1.6.2, can be used freely as per GNU General Public License

/mITuSkillologies @mitu_group /company/mitu- MITUSkillologies


skillologies

Web Resources
https://mitu.co.in
http://tusharkute.com

contact@mitu.co.in
tushar@tusharkute.com

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