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Regression Models For Quantitative (Numeric) and Qualitative (Categorical) Predictors

This document discusses regression models for quantitative and qualitative predictors. It describes polynomial regression models that can be used when the true relationship is polynomial or complex nonlinear. Both models with a single predictor and response surfaces with multiple predictors are covered. The document also discusses including qualitative predictors by using dummy variables and testing for interactions between qualitative and quantitative predictors.

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ram suri
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63 views12 pages

Regression Models For Quantitative (Numeric) and Qualitative (Categorical) Predictors

This document discusses regression models for quantitative and qualitative predictors. It describes polynomial regression models that can be used when the true relationship is polynomial or complex nonlinear. Both models with a single predictor and response surfaces with multiple predictors are covered. The document also discusses including qualitative predictors by using dummy variables and testing for interactions between qualitative and quantitative predictors.

Uploaded by

ram suri
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Regression Models for Quantitative

(Numeric) and Qualitative


(Categorical) Predictors

KNNL – Chapter 8
Polynomial Regression Models
• Useful in 2 Settings:
– True relation between response and predictor is
polynomial
– True relation is complex nonlinear function that can be
approximated by polynomial in specific range of X-levels
• Models with 1 Predictor: Including p polynomial
terms in model, creates p-1 “bends”
– 2nd order Model: E{Y} = b0 + b1x + b2x2 (x = centered X)
– 3rd order Model: E{Y} = b0 + b1x + b2x2 + b3x3
• Response Surfaces with 2 (or more) predictors
– 2nd order model with 2 Predictors:
E Y   b0  b1 x1  b2 x2  b11 x12  b22 x22  b12 x1 x2 x1  X1  X 1 x2  X 2  X 2
Modeling Strategies
• Use Extra Sums of Squares and General Linear Tests to
compare models of increasing complexity (higher order)
• Use coding in fitting models (centered/scaled)
predictors to reduce multicollinearity when conducting
testing.
• Fit models in original units, or back-transform for
plotting on original scale* (see below for quadratic)
• For Response Surfaces, include multiple replicates at
center point for goodness-of-fit tests

   
^ 2
Centered variables: Y  b0  b1 x  b11 x 2  b0  b1 X  X  b11 X  X
2

 b0  b1 X  b1 X  b11 X 2  2b11 X X  b11 X  b0  b1 X  b11 X
2
  
2
 b1  2b11 X X  b11 X  bo'  b1' X  b2' X 2
Regression Models with Interaction Term(s)
• Interaction  Effect (Slope) of one predictor variable
depends on the level other predictor variable(s)
• Formulated by including cross-product term(s) among
predictor variables
• 2 Variable Models: E{Y} = b0 + b1X1 + b2X2 + b3X1X2
X 2  0  E Y   b 0  b1 X 1  b 2  0   b3  X 1 (0)   b 0  b1 X 1

X 2  10  E Y   b 0  b1 X 1  b 2 10   b3  X 1 (10)   b 0  b1 X 1  10b 2  10b3 X 1 


  b 0  10b 2    b1  10b3  X 1

Testing Hypothesis of no interaction: H 0 : b3  0 H A : b3  0


Qualitative Predictors
• Often, we wish to include categorical variables as
predictors (e.g. gender, region of country, …)
• Trick: Create dummy (indicator) variable(s) to
represent effects of levels of the categorical variables
on response
• Problem: If variable has c categories, and we create c
dummy variables, the model is not full rank when we
include intercept
• Solution: Create c – 1 dummy variables, leaving one
level as the control/baseline/reference category
Example – Salary vs Experience by Region
State has 3 regions, sample 2 people per region, Y =salary, X 1  experience
1 if Region 1 1 if Region 2 1 if Region 3
X2   X3   X4  
 0 otherwise  0 otherwise  0 otherwise
 6

1 X 11 1 0 0  6  X i1 2 2 2 
1 X 21 1 0 0   i 1

  6 6

1 X 31 0 1 0   X i1  X i21 X 11  X 21 X 31  X 41 X 51  X 61 
X  X'X   i 1 i 1 
1 X 41 0 1 0
 2 X 11  X 21 2 0 0 
1 X 51 0 0 1  
   2 X 31  X 41 0 2 0 
1 X 61 0 0 1 
 2 
X 51  X 61 0 0 2

Solution, just use the Region 1 dummy (X2) and the region 2 dummy (X3), making
Region 3 the “reference” region (Note: it is arbitrary which region is the reference)
Example – Salary vs Experience by Region
1 if Region 1 1 if Region 2
3 regions, Y =salary, X 1  experience X2   X3  
 0 otherwise  0 otherwise

E Y   b 0  b1 X 1  b 2 X 2  b3 X 3

Region 1: X 2  1, X 3  0  E Y   b 0  b1 X 1  b 2 (1)  b3 (0)   b 0  b 2   b1 X 1


Region 2: X 2  0, X 3  1  E Y   b 0  b1 X 1  b 2 (0)  b3 (1)   b 0  b3   b1 X 1
Region 3: X 2  0, X 3  0  E Y   b 0  b1 X 1  b 2 (0)  b3 (0)  b 0  b1 X 1

b 2  Difference between Regions 1 and 3, controlling for experience


b3  Difference between Regions 2 and 3, controlling for experience
b 2  b3  Difference between Regions 1 and 2, controlling for experience

b 2  b3  0  No differences among Regions 1,2,3 wrt Salary, Controlling for Experience


Interactions Between Qualitative and Quantitative Predictors
• We can allow the slope wrt to a Quantitative Predictor to
differ across levels of the Categorical Predictor
• Trick: Create cross-product terms between Quantitative
Predictor and each of the c-1 dummy variables
• Can conduct General Linear Test to determine whether
slopes differ (or t-test when qualitative predictor has c=2
levels)
• These models generalize to any number of quantitative
and qualitative predictors
Salary (Y ), Expediture (X 1 ), and regions (X 2 , X 3 ):
Additive Model: E Y   b0  b1 X 1  b 2 X 2  b3 X 3
Interaction Model: E Y   b0  b1 X 1  b 2 X 2  b3 X 3  b 4 X 1 X 2  b5 X 1 X 3
Region 1: X 2  1, X 3  0  : E Y   b0  b1 X 1  b 2 (1)  b3 (0)  b 4 X 1 (1)  b5 X 1 (0)   b0  b 2    b1  b 4  X 1
Region 2: X 2  0, X 3  1 : E Y    b0  b3    b1  b5  X 1 Region 3: X 2  0, X 3  0  : E Y   b0  b1 X 1

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