REGRESSION ANALYSIS
Regression is the measure of the average relationship between
two or more variables in terms of the original units of the data..
-- Blair
Regression Analysis 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. - Ya-
Lurn-Chou
Prof. Kuldeep Sharma, IIBS
Bengaluru
Regression Analysis is a statistical device with the
help of which we can estimate or predict the
unknown values of one variable from the known
values of the other variable.
The variable which is used to predict the variable
of interest is called Independent variable,
generally denoted as X and the variable we are
trying to predict is called as Dependent Variable
generally denoted as Y.
X is regressor or predictor or Explainator & Y
is Regressed or Explained variable.
Prof. Kuldeep Sharma, IIBS
Bengaluru
Regression means to return or to go back. So it implies the
Act of returning to or going back to.
Natural phenomenon generally have a tendency to return to normal.
In stats, The term Regression is used to denote backward tendency
which means going back to average or normal.
Sir Francis Galton used this term in the study of heredity.
(regression or mediocrity)
Prof. Kuldeep Sharma, IIBS
Bengaluru
Regression Analysis
• Purpose: to determine the regression equation; it is
used to predict the value of the dependent variable
(Y) based on the independent variable (X).
• Procedure: select a sample from the population
and list the paired data for each observation; draw
a scatter diagram to give a visual portrayal of the
relationship; determine the regression equation.
• Y= a + bX where, n( XY ) ( X )( Y )
b
n( X 2 ) ( X ) 2
Y X
Prof. Kuldeep Sharma, IIBS
a b
Bengaluru
n n
Regression Line Assumptions
• For each value of X, there is a group of Y values, and
these Y values are normally distributed.
• The means of these normal distributions of Y values
all lie on the straight line of regression.
• The standard deviations of these normal distributions
are equal.
• The Y values are statistically independent. This means
that in the selection of a sample, the Y values chosen
for a particular X value do not depend on the Y values
for any other X values.
Prof. Kuldeep Sharma, IIBS
Bengaluru
UTILITY OF REGRESSION ANALYSIS
1. The cause & effect relations are indicated from the study
of regression analysis.
2. It establishes the rate of change in one variable in terms
of the changes in another variable.
3. It is useful in economic analysis as regression equation
can determine an increase in the cost of living index for a
particular increase in general price level.
4. It helps in prediction and thus it can estimate the values of
unknown quantities.
Prof. Kuldeep Sharma, IIBS
Bengaluru
5. It enables us to study the nature of relationship between
the variables.
6. It helps in determining the coefficient of correlation as
r = √byx *bxy
7. It can be useful to all natural, social and physical
sciences, where the data are in functional relationship.
Prof. Kuldeep Sharma, IIBS
Bengaluru
RELATION BETWEEN REGRESSION ANALYSIS AND
CORRELATION ANALYSIS
Correlation Analysis Regression Analysis
It is relationship between two or Regression means returning to
more variables average value
R between X & Y is a measure of byx & bxy are mathematical
direction & degree of linear measures expressing the avg
relationship relationships between X & Y
It is symmetric in X & Y ryx = rxy These are not symmetrical byx not
= bxy
It indicates the degree of association It is used to forecast the nature of
dependent variable when the
independent variable is known
Prof. Kuldeep Sharma, IIBS
Bengaluru
Correlation Analysis Regression Analysis
It is a relative measure and is Regression Coefficients are absolute
independent of the units of measure of finding out the relationship
measurement between two or more variables.
It does not imply cause & effect It indicates the cause & effect
relationships between the variables relationship between the variables.
under study The variable corresponding to cause is
taken as independent variable, whereas
corresponding to effect is taken as
dependent variable.
R does not reflect upon the nature of It estimates the value of dependent
variable variable for any given value of
independent variable.
It has limited application as it is It has wider applications as it also
confined to the study of linear studies non-linear relationship between
relationship between two variables. the variables.
Prof. Kuldeep Sharma, IIBS
Bengaluru
