An Introduction to Logistic Regression.ppt

An Introduction to Logistic Regression JohnWhitehead Department of Economics Appalachian State University Outline Introduction and Description Some Potential Problems and Solutions Writing Up the Results Introduction and Description Why use logistic regression? Estimation by maximum likelihood Interpreting coefficients Hypothesis testing Evaluating the performance of the model Why use logistic regression? There are many important research topics for which the dependent variable is limited. For example: voting, morbidity or mortality, and participation data is not continuous or distributed normally. Binary logistic regression is a type of regression analysis where the dependent variable is a dummy variable: coded 0 (did not vote) or 1(did vote) The Linear Probability Model In the OLS regression: Y = ? + ??X + e ; where Y = (0, 1) The error terms are heteroskedastic e is not normally distributed because Y takes on only two values The predicted probabilities can be greater than 1 or less than 0 An Example: Hurricane Evacuations The Data OLS Results Problems: Heteroskedasticity The Logistic Regression Model The logit model solves these problems:ln[p/(1-p)] = ?? + ?X + e p is the probability that the event Y occurs, p(Y=1) p/(1-p) is the odds ratio ln[p/(1-p)] is the log odds ratio, or logit More: The logistic distribution constrains the estimated probabilities to lie between 0 and 1. The estimated probability is: p = 1/[1 + exp(-? - ? X)]  if you let ? + ? X =0, then p = .50 as ? + ? X gets really big, p approaches 1 as ? + ? X gets really small, p approaches 0 Comparing LP and Logit Models Maximum Likelihood Estimation (MLE) MLE is a statistical method for estimating the coefficients of a model. The likelihood function (L) measures the probability of observing the particular set of dependent variable values (p1, p2, ..., pn) that occur in the sample:  L = Prob (p1* p2* * * pn) The higher the L, the higher the probability of observing the ps in the samp