SimpleLinearRegressionandCorrelation-TheUniversity.pptVIP

Simple Linear Regression  Introduction In Chapters 17 to 19, we examine the relationship between interval variables via a mathematical equation. The motivation for using the technique: Forecast the value of a dependent variable (Y) from the value of independent variables (X1, X2,…Xk.). Analyze the specific relationships between the independent variables and the dependent variable. The Model The first order linear model Y = dependent variable X = independent variable b0 = Y-intercept b1 = slope of the line e = error variable Estimating the Coefficients The estimates are determined by drawing a sample from the population of interest, calculating sample statistics. producing a straight line that cuts into the data. The Least Squares (Regression) Line The Estimated Coefficients Example 17.2 (Xm17-02) A car dealer wants to find the relationship between the odometer reading and the selling price of used cars. A random sample of 100 cars is selected, and the data recorded. Find the regression line. Interpreting the Linear Regression -Equation Error Variable: Required Conditions The error e is a critical part of the regression model. Four requirements involving the distribution of e must be satisfied. The probability distribution of e is normal. The mean of e is zero: E(e) = 0. The standard deviation of e is se for all values of X. The set of errors associated with different values of Y are all independent. The Normality of e Assessing the Model The least squares method will produces a regression line whether or not there are linear relationship between X and Y. Consequently, it is important to assess how well the linear model fits the data. Several methods are used to assess the model. All are based on the sum of squares for errors, SSE. Sum of Squares for Errors This is the sum of differences between the points and the regression line. It can serve as a measure of how well the line fits the data. SSE is defined by Standard Error of Estimate The mean err