Scribd
Upload
17 views7 pages

LBYACST [Lecture Notes] (2)

The document discusses inferential statistics focusing on correlation and regression analysis, detailing simple and multiple linear regression methods to analyze relationships between variables such as income and debt payments. It emphasizes the importance of hypothesis testing, goodness-of-fit measures, and the distinction between correlation and causation. The goals of regression analysis include predicting outcomes and determining the significance of relationships between variables.

Uploaded by

Jan Heart Saulon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
17 views7 pages

LBYACST [Lecture Notes] (2)

The document discusses inferential statistics focusing on correlation and regression analysis, detailing simple and multiple linear regression methods to analyze relationships between variables such as income and debt payments. It emphasizes the importance of hypothesis testing, goodness-of-fit measures, and the distinction between correlation and causation. The goals of regression analysis include predicting outcomes and determining the significance of relationships between variables.

Uploaded by

Jan Heart Saulon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 7

Inferential Statistics: (Correlation and Regression Analysis)

Simple linear regression: to know the relationship between two variables


●​ Expense – Sales
Multiple linear regression: to know the relationship between multiple variables
​ We can use Excel, R, or Jamovi

Introductory case: Consumer Debt Payments**


●​ An economist uses correlation and regression analysis to learn about the impact of
unemployment in a consumer’s debt payment since they believe that the lower the
income, the less likely to pay debt
●​ Debt payment depends where a person lives
●​ Income can explain the changes in debt payment (y)
○​ X1: Income
○​ X2: Unemployment
●​ Uses the median income

1.​ Determine if debt payments and income are correlated.


2.​ Use regression analysis to make predictions for debt payments for given values of
income and unemployment rate.
3.​ Use various goodness-of-fit measures to determine the regression model that best fits
the data.

Scatterplot: shows the relationship between two variables


●​ There is a linear relationship between x and y
○​ As income increases, debt payment increases
Correlation:
●​ Correlation of coefficients
○​ Describes both the direction and strength of the linear relationship
○​ Negative: negative linear relationship (Perfect negative: -1)
○​ Positive: positive relationship (Perfect positive: 1)
■​ 0.80 → perfectly positive: strong linear relationship
○​ Zero: no linear relationship (not linearly related)
○​ Only captures a linear relationship
○​ May not be a reliable measure in the presence of outliers
○​ Does not imply causation
■​ Even if 2 variables are highly correlated, one does not necessarily cause
the other
○​ Cannot be used for prediction
○​ To predict values, we need a model
●​ R square

Goal of regression analysis:


1)​ Make a prediction
2)​ Determine linear relationship (We can use scatterplot to show relationship)

A hypothesis test is conducted to determine whether the linear relationship is real or due to
chance
●​ p-value is the empirical evidence? Analysis? Kalimutan q
●​ Conclusion: Reject or Fail to reject the null hypothesis (NOT ACCEPT)
○​ Instead of accept: DO NOT REJECT
○​ Whether to reject or fail to reject depends on the significance level

Regression Analysis
●​ One of the most widely used methodologies in business
●​ Response variable → influenced by other variables (explanatory variables)
●​ Use information on the explanatory variables to predict/or describe changes in the
response variables
●​ Allows us to make predictions regarding the response variable

2 goals of regression analysis:


●​ Establish whether there is a relationship between two variables
○​ Establish if there is a significant relationship exists between the two variables
○​ Example: Wage and gender, income and spending, student height and exam
score
●​ Predict new observations
○​ Is it possible to use what we know about the relationship to forecast unobserved
values?
○​ Example: Predicting study score using study length time

Linear regression model


●​ Develop a mathematical model that captures the relationship between the response
variable and explanatory variables
○​ Target or response variable: y
○​ Input or predictor variables: x1, x2
●​ A linear regression model has two components
○​ Deterministic: approximates the relationship we want to
○​ Stochastic
●​ Simple linear regression uses one predictor variable
○​ 𝑦 = β0 + β1 + ε
○​ Beta zero is the unknown intercept
○​ Beta one is the unknown slope
○​ Beta zero + Beta one is the deterministic component
○​ Epsilon is the stochastic component or random error tem
●​ The expected value of y for a given value of x lies on a straight line: 𝐸(𝑦) = β0 + β1𝑥

Using the population data


●​ We use sample data to estimate the parameters; n pairs of observations on y and x
●​ Beta zero and beta 1 are estimates of β0 + β1

●​ We will focus on providing interpretations rather than calculations

●​ Simple linear regression uses only a single explanatory variable


●​ This might reduce the usefulness of the model
●​ A multiple linear regression model allows us to examine how the response is influenced
by two or more explanatory variables
○​ Extension of simple linear regression
●​ The choices of the explanatory variables are based on economic theory, intuition, and/or
prior research
○​ Level of customer engagement ⇢ X1
○​ EPS ⇢ X2
■​ Should be chosen with supported evidence or existing studies

●​ Y hat = small b for beta


●​ Error is the difference between y and y hat
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy