Regression Analysis

• MEANING OF REGRESSION: The dictionary meaning of the word

Regression is ‘Stepping back’ or ‘Going back’. Regression is the measures
of the average relationship between two or more variables in terms of the
original units of the data. And it is also attempts to establish the nature of
the relationship between variables that is to study the functional
relationship between the variables and thereby provide a mechanism for
prediction, or forecasting
• REGRESSION ANALYSIS: The statistical technique of estimating the unknown value of one
variable (i.e., dependent variable) from the known value of other variable (i.e., independent
variable) is called regression analysis. How the typical value of the dependent variable changes
when any one of the independent variables is varied, while the other independent variables are
held fixed.
• 4. Examples: The effect of a price increase upon demand, for example, or the effect of changes
in the money supply upon the inflation rate. Factors that are associated with variations in
earnings across individuals—occupation, age, experience, educational attainment, motivation,
and ability. For the time being, let us restrict attention to a single factor—call it education.
Regression analysis with a single explanatory variable is termed “simple regression.”
• 5. Price = f (Qty.) Sales = f(advt.) Yield = f(Fertilizer) No. of students = f(Infrastructure) Earning =
f(Education) Weight = f(Height) Production = f(Employment) Dependent Variables Independent Variables
• 6. Importance of Regression Analysis Regression analysis helps in three important ways :- 1. It provides
estimate of values of dependent variables from values of independent variables. 2. It can be extended to
2or more variables, which is known as multiple regression. 3. It shows the nature of relationship between
two or more variable.
• 7. USE IN ORGANIZATION In the field of business regression is widely used. Businessman are
interested in predicting future production, consumption, investment, prices, profits, sales etc. So the
success of a businessman depends on the correctness of the various estimates that he is required to make.
It is also use in sociological study and economic planning to find the projections of population, birth rates.
death rates etc.
• 8. Regression Lines A regression line is a line that best describes the linear relationship
between the two variables. It is expressed by means of an equation of the form: y = a + bx
The Regression equation of X on Y is: X = a + bY The Regression equation of Y on X is: Y
= a + bX
• 9. Regression Lines And Coefficient of Correlation Perfect Positive Correlation Perfect
Negative Correlation r = + 1 r = -1
• 10. High Degree of Positive Correlation High Degree of Negative Correlation
• 11. Low Degree of Positive Correlation Low Degree of Positive Correlation
• 12. No Correlation Y on X X on Y r = 0
• 13. REGRESSION Through Regression Coefficient DEVIATION METHOD FROM
AIRTHMETIC MEAN DEVIATION METHOD FORM ASSUMED MEAN Through
Normal Equation
• 14. Through Normal Equation: Least Square Method The regression equation of X on Y
is : X= a+bY Where, X=Dependent variable Y=Independent variable The regression
equation of Y on X is: Y = a+bX Where, Y=Dependent variable X=Independent variable
And the values of a and b in the above equations are found by the method of least of
Squares-reference . The values of a and b are found with the help of normal equations
given below: (I ) (II )       2 XbXaXY XbnaY       2
YbYaXY YbnaX
• 15. Example1-:From the following data obtain the two regression equations using the method of Least
Squares. X 3 2 7 4 8 Y 6 1 8 5 9 Solution-: X Y XY X2 Y2 3 6 18 9 36 2 1 2 4 1 7 8 56 49 64 4 5 20 16 25 8 9
72 64 81   24X   29Y  168XY 1422 X 2072 Y
• 16.   XbnaY    2 XbXaXY Substitution the values from the table we get
29=5a+24b…………………(i) 168=24a+142b 84=12a+71b………………..(ii) Multiplying equation (i ) by
12 and (ii) by 5 348=60a+288b………………(iii) 420=60a+355b………………(iv) By solving
equation(iii)and (iv) we get a=0.66 and b=1.07 By putting the value of a and b in the Regression equation Y on
X we get Y=0.66+1.07X
• 17. Now to find the regression equation of X on Y , The two normal equation are       2 YbYaXY
YbnaX Substituting the values in the equations we get 24=5a+29b………………………(i)
168=29a+207b…………………..(ii) Multiplying equation (i)by 29 and in (ii) by 5 we get a=0.49 and b=0.74
Substituting the values of a and b in the Regression equation X and Y X=0.49+0.74Y
• 18. Through Regression Coefficient: Deviations from the Arithmetic mean method: The calculation by the
least squares method are quit difficult when the values of X and Y are large. So the work can be simplified by
using this method. The formula for the calculation of Regression Equations by this method: Regression
Equation of X on Y- )()( YYbXX xy  Regression Equation of Y on X- )()( XXbYY yx    2 y xy
bxy   2 x xy byx and Where, xyb yxband = Regression Coefficient
• 19. Example2-: From the previous data obtain the regression equations by Taking deviations from the actual
means of X and Y series. X 3 2 7 4 8 Y 6 1 8 5 9 X Y x2 y2 xy 3 6 -1.8 0.2 3.24 0.04 -0.36 2 1 -2.8 -4.8 7.84
23.04 13.44 7 8 2.2 2.2 4.84 4.84 4.84 4 5 -0.8 -0.8 0.64 0.64 0.64 8 9 3.2 3.2 10.24 10.24 10.24 XXx  YYy
   24X   29Y 8.26 2 x 8.28xy8.382 y  0x 0 y Solution-:
• 20. Regression Equation of X on Y is     YX YX YX y xy bxy 74.049.0 8.574.08.4 8.5 8.38 8.28 8.4 2 
     Regression Equation of Y on X is )()( XXbYY yx    XY XY XY x xy byx 07.166.0 )
8.4(07.18.5 8.4 8.26 8.28 8.5 2       ………….(I) ………….(II) )()( YYbXX xy 
• 21. It would be observed that these regression equations are same as those obtained by the direct
method . Deviation from Assumed mean method-: When actual mean of X and Y variables are in
fractions ,the calculations can be simplified by taking the deviations from the assumed mean. The
Regression Equation of X on Y-:          22 yy yxyx xy ddN ddddN b The Regression
Equation of Y on X-:          22 xx yxyx yx ddN ddddN b )()( YYbXX xy  )()
( XXbYY yx  But , here the values of and will be calculated by following formula:xyb yxb
• 22. Example-3: From the data given in previous example calculate regression equations by
assuming 7 as the mean of X series and 6 as the mean of Y series. X Y Dev. From assu. Mean 7
(dx)=X-7 Dev. From assu. Mean 6 (dy)=Y-6 dxdy 3 6 -4 16 0 0 0 2 1 -5 25 -5 25 +25 7 8 0 0 2 4 0 4
5 -3 9 -1 1 +3 8 9 1 1 3 9 +3 Solution-: 2 xd 2 yd   24X   29Y   11xd   1yd 512 xd
 392 yd  31yxdd
• 23. The Regression Coefficient of X on Y-:          22 yy yxyx xy ddN ddddN b 74.0 194
144 1195 11155 )1()39(5 )1)(11()31(5 2         xy xy xy xy b b b b 8.5 5 29   Y N Y
Y The Regression equation of X on Y-: 49.074.0 )8.5(74.0)8.4( )()(    YX YX YYbXX xy 8.4 5
24   X N X X
• 24. The Regression coefficient of Y on X-:          22 xx yxyx yx ddN ddddN b 07.1 134 144
121255 11155 )11()51(5 )1)(11()31(5 2         yx yx yx yx b b b b The Regression Equation
of Y on X-: )()( XXbYY yx  66.007.1 )8.4(07.1)8.5(   XY XY It would be observed the these
regression equations are same as those obtained by the least squares method and deviation from arithmetic
mean .
• 25. Difference Between Correlation and Regression Analysis
•