Multiple Regression

Multiple regression formulas analyze the relationship between dependent

and multiple independent variables. For example, the equation Y
represents the formula is equal to a plus bX1 plus cX2 plus dX3 plus E
where Y is the dependent variable, and X1, X2, and X3 are independent
variables. A is the intercept, b, c, and d are the slopes, and E is the
residual value.

Multiple regressions are a very useful statistical method. Regression plays

a very important role in the world of finance. A lot of forecasting is done
using regression analysis. For example, one can predict the sales of a
particular segment in advance with the help of macroeconomic indicators
that have a very good correlation with that segment.

 Multiple regression formulas are used to analyze the relationship

between a dependent variable and multiple independent variables.

 This method uses two or more independent variables to forecast or

predict the dependent variable.

 The main objective is to identify and examine the relationship

between the dependent and independent variables. Based on this
analysis, suitable independent variables are selected to aid in
predicting the dependent variable.
  Multiple regression is employed when linear regression alone cannot
fulfill the intended purpose, and it helps determine the effectiveness
of the chosen predictor variables in forecasting the dependent
variable.

Multiple Regression Formula Explained

Multiple regression model formula are a method to predict the

dependent variable with the help of two or more independent variables.
While running this analysis, the main purpose of the researcher is to find
out the relationship between the dependent and independent variables.
The multiple independent variables are chosen, which can help predict the
dependent variable to predict the dependent variable. One may use it
when linear regression cannot serve the purpose. The regression analysis
helps in the process of validating whether the predictor variables are good
enough to help in predicting the dependent variable.

y = mx1 + mx2+ mx3+ b

Where,

 Y= the dependent variable of the regression

 M= slope of the regression

 X1=first independent variable of the regression

 The x2=second independent variable of the regression

 The x3=third independent variable of the regression

 B= constant

The main aim of this method of multiple regression model formula is

to estimate the coefficients that reduce or minimize the sum of squared
differences between the values of Y and the values that are predicted by
the equations. Various software packages used for statistical purposes can
perform this analysis systematically because they are designed to handle
complex calculations within a limited timeframe and provide statistical
evaluation of the accuracy.

Examples

Let us understand the concept of multiple regression analysis

formula with the help of suitable examples.

Example #1

Let us try and understand the concept of multiple regression

analysis with the help of an example. But, first, let us try to find
out the relation between the distance covered by an UBER driver
and the age of the driver, and the number of years of experience
of the driver.

To calculate multiple regression, go to the "Data" tab in Excel and select

the "Data Analysis" option. For further procedure and calculation, refer to
the: Analysis ToolPak in Excel article.

The regression formula for the above example will be

1. y = MX + MX + b
 2. y= 604.17*-3.18+604.17*-4.06+0

3. y= -4377

In this particular example of multiple regression analysis formula, we

will see which variable is the dependent variable and which variable is the
independent variable. The dependent variable in this regression equation
is the distance covered by the UBER driver, and the independent variables
are the age of the driver and the number of experiences he has in driving.

Example #2

Let us try and understand the concept of multiple regression

analysis with the help of another example. Let us try to find the
relation between the GPA of a class of students, the number of
hours of study, and the student's height.

Go to the "Data" tab in Excel and select the "Data Analysis" option for the
calculation.
The regression equation for the above example will be

y = MX + MX + b

y= 1.08*.03+1.08*-.002+0

y= .0325

In this particular example, we will see which variable is the dependent

variable and which variable is the independent variable. The dependent
variable in this regression is the GPA, and the independent variables are
study hours and the height of the students.

Example #3

Let us try and understand the concept of multiple regression

analysis with the help of another example. Now, let us find out
the relation between the salary of a group of employees in an
organization, the number of years of experience, and the age of
the employees.
Go to the "Data" tab in Excel and select the "Data Analysis" option for the
calculation.

The regression equation for the above example will be

 y = MX + MX + b

 y= 41308*.-71+41308*-824+0

 y= -37019
In this particular example, we will see which variable is the dependent
variable and which variable is the independent variable. The dependent
variable in this regression equation is the salary, and the independent
variables are the experience and age of the employees.

Thus, the above examples successfully explain the formula and the
concept by using different case studies to highlight the various areas of
study where it can be applied and used to derive suitable results that can
be easily interpreted.

Relevance And Uses

Let us look at some of the uses of the concept.

 This concept is widely used for prediction of the values of the

dependent variables with relation to the values of independent
variables. Some examples of such situations can be prediction of
share prices, sales value and students performance over a period of
time. In this way it can also help in assessing the relation between
many or multiple variables.

 Multiple regression model equation can be used to isolate and

identify any particular factor that can impact one variable while
other variables constant.

 It can successfully capture the relationships between both the

dependent and independent variables which are complex, not linear
in nature and and includes more than one predictor.

 Businesses can take decisions based on the outcome of this

calculation related to employee performance, sales figures,
customer demand and satisfaction levels, etc.

 Any business is subject to a numberof risks related to market

movements, demand, supply, prices, material availability and many
more. In such cases this concept and calculation can be used by the
finance and insurance companies to assess the return or the claim
that they may have to handle to cover such risks.

 Companies use the method of multiple regression model

equation to assess the extent to which the company's marketing
efforts are impacting the revenue and profits, which is helpful for
both the stakeholders andthe management to make crucial
decisions. The method also helps establish relationships
betweenimportant variables like the GDP, employment, and
inflation, which are essential factors that every country's
government needs to look into for all round development of the
economy.
  It helps in quality control and also generate process improvement
ideas that contribute to the upgradation of the standard of the
products and services of the organization.

Thus, we see that the concept has a number of uses in the financial as
well as statistical field. It uses complex datasets and helps businesses
generate business models or take complex financial and other type of
decisions that guides the business towards a smooth operational process.
It is necessary to use the procedure in the correct manner to get proper
result.