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Where We’ve Been. Presented methods for estimating and testing population parameters for a single
sample Extended those methods to allow for a comparison of population parameters for multiple
samples. Simple Linear Regression Model Least Squares Method Coefficient of Determination
Model Assumptions. Regression Analysis attempts to determine the strength of the relationship
between one dependent variable (usually denoted by Y) and a series of other changing variables
(known as independent variables).. Regression Analysis. Testing Significance of Model Parameters -
?? ?? and. Recall that a normal model was specified by two parameters, and sSimilarly, we can create
a linear model to describe the relationship between two quantitative variablesThe parameters for our
linear model are b0 (the y-intercept) and b1 (the slope)We write the eq. The results from the
regression help in predicting an unknown value depending on the relationship with the predicting
variables. Linear Regression. 3. Cost funct ion. We want to penalize from deviation from the target
values. As part of the advertising campaign Reed runs one or more television commercials during the
weekend preceding the sale. Suppose, for example, my regression model aims to predict people’s IQ
scores, using their educational attainment (number of years of education) and their income as
predictors. The next part of the R output looks at the coefficients of the regression model.
Specifically, you might want some kind of standard measure of which predictors have the strongest
relationship to the outcome. First, I need to define the model from which the process starts. When
the regression line is good, our residuals (the lengths of the solid black lines) all look pretty small, as
shown in Figure 15.4, but when the regression line is a bad one, the residuals are a lot larger, as you
can see from looking at Figure 15.5. Hm. Maybe what we “want” in a regression model is small
residuals. Regression may be the most widely used statistical technique in the social and natural
sciences—as well as in business. In other words, we really don’t have any problem as far as
anomalous data are concerned. You can construct hypothesis tests for those kind of constraints too,
but it is somewhat more complicated and the sampling distribution for \(F\) can end up being
something known as the non-central \(F\) distribution, which is waaaaay beyond the scope of this
book. With its simplified language and straightforward approach, this book makes it easy for social
scientists to understand the fundamental principles of linear regression analysis, regardless of their
statistical background. If there is more than predicting variable, the regression is referred to as
Multiple Linear Regression. This is dangerous, and the authors of cor.test() obviously felt that they
didn’t want to support that kind of behaviour. Note that it refers to the residuals as “Pearson
residuals”, but in this context these are the same as ordinary residuals. If this plot looks
approximately linear, then we’re probably not doing too badly (though that’s not to say that there
aren’t problems). The formula for drawing the “best fit line” when working with estimations will be
the same as the straight line formula, but with hat notation. It is sometimes useful to construct
submodels by placing other kinds of constraints on the regression coefficients. Our objective is to
study the relationship between two variables X and Y. And finally, the GDP beta or correlation
coefficient of 88.15 tells us that if GDP increases by 1%, sales will likely go up by about 88 units.
Terminology. Moments, Skewness, Kurtosis Analysis of variance ANOVA Response (dependent)
variable Explanatory ( independent) variable Linear regression model. There are two different (but
related) kinds of hypothesis tests that we need to talk about: those in which we test whether the
regression model as a whole is performing significantly better than a null model; and those in which
we test whether a particular regression coefficient is significantly different from zero. Linear
regression attempts to estimate a line that best fits the data (a line of best fit ) and the equation of
that line results in the regression equation. Ray-Bing Chen Institute of Statistics National University
of Kaohsiung. 3.1 Multiple Regression Models. Stripped to its bare essentials, linear regression
models are basically a slightly fancier version of the Pearson correlation (Section 5.7 ) though as
we’ll see, regression models are much more powerful tools.
The linear model we are using assumes that the relationship between the two variables is a perfect
straight line. In other words, the regression.1 model that we started with is the better model. I don’t
want to sound too gushy about it, but I do think that Fox and Weisberg ( 2011 ) is well worth
reading. What we’re looking to see here is a straight, horizontal line running through the middle of
the plot. So the step() function stops, and prints out the result of the best regression model it could
find. All we do is add more terms to our regression equation. This random error (?) characterizes the
linear regression model. When we use the correlate() function in Section 5.7 all it did was print out
the correlation matrix. This \(F\) statistic has exactly the same interpretation as the one we introduced
in Chapter 14. If you've ever wondered how two or more pieces of data relate to each other (e.g.
how GDP is impacted by changes in unemployment and inflation), or if you've ever had your boss
ask you to create a forecast or analyze predictions based on relationships between variables, then
learning regression analysis would be well worth your time. It doesn’t cover the full space of things
you could do, but it’s still much more detailed than what I see a lot of people doing in practice; and I
don’t usually cover all of this in my intro stats class myself. Not surprisingly, the line goes through
the middle of the data. So the commands to draw this figure might look like this. Regression is not
limited to two variables, we could have 2 or more variables showing a relationship. First, I need to
define the model from which the process starts. You can construct hypothesis tests for those kind of
constraints too, but it is somewhat more complicated and the sampling distribution for \(F\) can end
up being something known as the non-central \(F\) distribution, which is waaaaay beyond the scope
of this book. If we ignore the low level details, it’s fairly obvious what the AIC does: on the left we
have a term that increases as the model predictions get worse; on the right we have a term that
increases as the model complexity increases. Plot the given data and make a freehand estimated
regression line. 3.3 INFERENCES ABOUT ESTIMATED PARAMETERS LEAST SQUARES
METHOD The Least Square method is the method most commonly used for estimating the
regression coefficients The straight line fitted to the data set is the line: where is the estimated value
of y for a given value of X. This can help you develop a more objective plan and budget for the
upcoming year. In fact, all I’m going to do in this section is show you how those tests are imported
wholesale into the regression framework. Popular business software such as Microsoft Excel can do
all the regression calculations and outputs for you, but it is still important to learn the underlying
mechanics. Where ?? is the predicted or fitted or estimated value of Y. Microsoft Excel and other
software can do all the calculations, but it's good to know how the mechanics of simple linear
regression work. In other words, in order to have a large Cook’s distance, an observation must be a
fairly substantial outlier and have high leverage. If these two are very close, then the regression
model has done a good job. In this article, you'll learn the basics of simple linear regression,
sometimes called 'ordinary least squares' or OLS regression —a tool commonly used in forecasting
and financial analysis. The linear equation is then used to predict values for the data. However, if you
calculate the AIC values using my formula for two different regression models and take the
difference between them, this will be the same as the differences between AIC values that step()
reports. For example, if we want to use both dan.sleep and baby.sleep as predictors in our attempt to
explain why I’m so grumpy, then the formula we need is this. Note that it’s often more convenient to
think about the difference between those two SS values as a sum of squares in its own right.
Next, we have an intercept of 34.58, which tells us that if the change in GDP was forecast to be
zero, our sales would be about 35 units. Simple Linear Regression. SECTIONS 9.1, 9.3 Inference for
slope (9.1) Confidence and prediction intervals (9.3) Conditions for inference (9.1) Transformations
(not in book). Perhaps some kind of multiple regression model would be in order. Finally, the fourth
column gives you the actual \(p\) value for each of these tests. 218 The only thing that the table itself
doesn’t list is the degrees of freedom used in the \(t\) -test, which is always \(N-K-1\) and is listed
immediately below, in this line. Multiple regression model: involve more than one regressor variable.
This \(F\) statistic has exactly the same interpretation as the one we introduced in Chapter 14. For
example, if we want to use both dan.sleep and baby.sleep as predictors in our attempt to explain why
I’m so grumpy, then the formula we need is this. The first thing to talk about is calculating
confidence intervals for the coefficients; after that, I’ll discuss the somewhat murky question of how
to determine which of predictor is most important. Regardless of what the original variables were, a
\(\beta\) value of 1 means that an increase in the predictor of 1 standard deviation will produce a
corresponding 1 standard deviation increase in the outcome variable. A multiple regression model
that might describe this relationship is. In a lot of situations, your variables are on fundamentally
different scales. How to use residuals How a regression equation is effected by a linear
transformation of either of the variables. To help address this issue, a new book has been developed
that presents the dynamics of linear regression analysis in a simplified and easy-to-understand
manner. And if we start throwing around phrases like Ockham’s razor, well, it sounds like everything
is wrapped up in a nice neat little package that no-one can argue with. Regardless of whether it’s a
simple regression or a multiple regression, we assume that the relatiships involved are linear. This
calculation shows you the direction of the relationship. In most simulation studies that I’ve seen, BIC
does a much better job of selecting the correct model. That is, it is an observation that is very
different to all the other ones in some respect, and also lies a long way from the regression line. In
the previous section I talked about the cor.test() function, which lets you run a hypothesis test on a
single correlation. The cor.test() function is (obviously) an extension of the cor() function, which we
talked about in Section 5.7. However, the cor() function isn’t restricted to computing a single
correlation: you can use it to compute all pairwise correlations among the variables in your data set.
Take a different approach again and you get the NML criterion. Microsoft Excel and other software
can do all the calculations, but it's good to know how the mechanics of simple linear regression work.
Recall that, in this data set, we were trying to find out why Dan is so very grumpy all the time, and
our working hypothesis was that I’m not getting enough sleep. The car package provides a function
called ncvTest() ( non-constant variance test ) that can be used for this purpose (Cook and Weisberg
1983 ). Probably the first thing to do is to try running the regression with that point excluded and see
what happens to the model performance and to the regression coefficients. Finally, I should note that
this section draws quite heavily from the Fox and Weisberg ( 2011 ) text, the book associated with
the car package. We use the single variable (independent) to model a linear relationship with the
target variable (dependent). Data are collected, in scientific experiments, to test the relationship
between various measurable quantities that are predicted by a hypothesis, either to support or
invalidate the hypothesis. I can’t count the number of times I’ve had a student panicking in my office
because they’ve run these pairwise correlation tests, and they get one or two significant results that
don’t make any sense. Decide that you’re a Bayesian and you get model selection based on posterior
odds ratios. The relationship between the two variables is approximated by a straight line.
In particular, the following three kinds of residual are referred to in this section: “ordinary residuals”,
“standardised residuals”, and “Studentised residuals”. You’re probably sick of hypothesis tests by
now, and don’t want to learn any new ones. Me too. I’m so sick of hypothesis tests that I’m going to
shamelessly reuse the \(F\) -test from Chapter 14 and the \(t\) -test from Chapter 13. In fact, the
formula is somewhat ugly, and not terribly helpful to look at. By default, the lm() function assumes
that the model should include an intercept (though you can get rid of it if you want). Step 1: Collect
and clean data (spreadsheet from heaven) Step 2: Calculate descriptive statistics Step 3: Explore
graphics Step 4: Choose outcome(s) and potential predictive variables (covariates). All we do is add
more terms to our regression equation. The test for the significance of a correlation is identical to the
\(t\) test that we run on a coefficient in a regression model. This is one of the standard regression
plots produced by the plot() function when the input is a linear regression object. There’s also an
outlierTest() function that tests to see if any of the Studentised residuals are significantly larger than
would be expected by chance. Models Linear regression Correlations Frequency tables. Some
Examples: Height and weight of people Income and expenses of people. In general, it is used to
estimate an unknown variable (aka. Testing a single correlation is fine: if you’ve got some reason to
be asking “is A related to B?”, then you should absolutely run a test to see if there’s a significant
correlation. Statistics SPSS An Integrative Approach SECOND EDITION. If this is horizontal and
straight, then we can feel reasonably confident that the “average residual” for all “fitted values” is
more or less the same. The next table lists some artificial data points, but these numbers can be easily
accessible in real life. Regardless of the terminology what this means is that we can think of Model 0
as a null hypothesis and Model 1 as an alternative hypothesis. So far, we know that given the Gauss-
Markov assumptions, OLS is BLUE. This is really just a “catch all” assumption, to the effect that
“there’s nothing else funny going on in the residuals”. We refer to the so called the Method of Least
Square. The linear equation is then used to predict values for the data. In other words, the
regression.1 model that we started with is the better model. In fact, I think I’ll go so far as to say that
the “best fitting” regression line is the one that has the smallest residuals. In other words, this is
basically the same approach to calculating confidence intervals that we’ve used throughout. Note that
it refers to the residuals as “Pearson residuals”, but in this context these are the same as ordinary
residuals. The actual answer to this question is complicated, and it doesn’t help you understand the
logic of regression. 216 As a result, this time I’m going to let you off the hook. This looks pretty
good, suggesting that there’s nothing grossly wrong, but there could be hidden subtle issues. If these
two are very close, then the regression model has done a good job. I’ll show you the AIC based
approach first because it’s simpler, and follows naturally from the step() function that we saw in the
last section. The superscripting here just indicates which model we’re talking about.
Below is the formula for a simple linear regression. The two plots of interest to us in this context are
generated using the following commands. This just means that we’re using the smallest sum of
squared errors. In a stunning turn of events, you can obtain these values using the following
command. For instance, suppose you want to forecast sales for your company and you've concluded
that your company's sales go up and down depending on changes in GDP. That is, start with the
complete regression model, including all possible predictors. We are generally more interested in the
slope of the model than the intercept. So, to. If you’re in the position of wanting to test all possible
pairs of variables, then you’re pretty clearly on a fishing expedition, hunting around in search of
significant effects when you don’t actually have a clear research hypothesis in mind. As you add
more predictors to the model, you make it more complex; each predictor adds a new free parameter
(i.e., a new regression coefficient), and each new parameter increases the model’s capacity to
“absorb” random variations. That is, we’re interested in the relationship between baby.sleep and
dan.grump, and from that perspective dan.sleep and day are nuisance variable or covariates that we
want to control for. And since I’ve indented it like that, it probably means that this is the right
answer. The residuals are the part of the data that hasn’t been modeled. Residuals. Therefore, In
Symbols,. Residuals. At the heart of a regression model is the relationship between two different
variables, called the dependent and independent variables. Linear Regression. 3. Cost funct ion. We
want to penalize from deviation from the target values. Regression is a statistical measurement that
attempts to determine the strength of the relationship between one dependent variable and a series of
other variables. If you did, mark yes and estimate the amount of time you spent preparing on your
frequency log. Problem. To get a sense of what this multiple regression model looks like, Figure 15.6
shows a 3D plot that plots all three variables, along with the regression model itself. The default in
the step() function is AIC, and since this is an introductory text that’s the only method I’ve
described, but the AIC is hardly the Word of the Gods of Statistics. A multiple regression model that
might describe this relationship is. A Probabilistic Algorithm for Computation of Polynomial
Greatest Common with. Looks like the same formula, but there’s some extra frilly bits in this
version. This is one of the standard regression plots produced by the plot() function when the input is
a linear regression object. If the correlation is -1, a 1% increase in GDP would result in a 1%
decrease in sales—the exact opposite. To make things even simpler, the lsr package includes a
function standardCoefs() that computes the \(\beta\) coefficients. Data are collected, in scientific
experiments, to test the relationship between various measurable quantities that are predicted by a
hypothesis, either to support or invalidate the hypothesis. Suppose, for example, my regression model
aims to predict people’s IQ scores, using their educational attainment (number of years of education)
and their income as predictors. This leads people to the natural question: can the cor.test() function do
the same thing. We need to standardize the covariance in order to allow us to better interpret and use
it in forecasting, and the result is the correlation calculation. Almost all of them produce the same
answers when the answer is “obvious” but there’s a fair amount of disagreement when the model
selection problem becomes hard. Just eyeballing the table, you can see that there is going to be a
positive correlation between sales and GDP.
There are two different ways we can compare these two models, one based on a model selection
criterion like AIC, and the other based on an explicit hypothesis test. Investopedia requires writers to
use primary sources to support their work. Plotting the Data A scatter plot of the data is a useful first
step for checking whether a linear relationship is plausible. Then, at each “step” we try all possible
ways of removing one of the variables, and whichever of these is best (in terms of lowest AIC value)
is accepted. You specify which one you want using the which argument (a number between 1 and 6).
This is important: if your regression model doesn’t produce a significant result for the \(F\) -test then
you probably don’t have a very good regression model (or, quite possibly, you don’t have very good
data). Simple Linear Regression. SECTION 2.6 Interpreting coefficients Prediction Cautions Least
Squares regression. The rationale behind standardised coefficients goes like this. Variable
transformation is another topic that deserves a fairly detailed treatment, but (again) due to deadline
constraints, it will have to wait until a future version of this book. Why complicate matters by
converting these to \(z\) -scores. There’s some hint of curvature here, but it’s not clear whether or not
we be concerned. How to use residuals How a regression equation is effected by a linear
transformation of either of the variables. If the value of y (dependent) is completely determined by
the value of x (Independent variable) Most are not determined completely by another. Can you
estimate the temperature on a summer evening, just by listening to crickets chirp. For example, if we
want to use both dan.sleep and baby.sleep as predictors in our attempt to explain why I’m so
grumpy, then the formula we need is this. We don’t find ourselves imagining anything like the rather
silly plot shown in Figure 15.3. The correlation calculation simply takes the covariance and divides it
by the product of the standard deviation of the two variables. Below is the formula for a simple
linear regression. Looks like the same formula, but there’s some extra frilly bits in this version. The
two plots of interest to us in this context are generated using the following commands. The variable
that might be considered as an explanatory variable is plotted on the x-axis, and the response
variable is plotted on the y- axis. This fitted line falls on the mean of the sample data, thus. Stripped
to its bare essentials, linear regression models are basically a slightly fancier version of the Pearson
correlation (Section 5.7 ) though as we’ll see, regression models are much more powerful tools.
Firstly, R is politely reminding us what the command was that we used to specify the model in the
first place, which can be helpful. If there is more than predicting variable, the regression is referred to
as Multiple Linear Regression. Perfect predictions: When dealing with z- scores, the z- score you
predict for the Y variable is exactly the same as the z -score for the X variable. If one variable
increases and the other variable tends to also increase, the covariance would be positive. And if we
start throwing around phrases like Ockham’s razor, well, it sounds like everything is wrapped up in a
nice neat little package that no-one can argue with. To see why this would be a bit of a problem, let’s
have a look at the correlation matrix for all four variables. In practice, this is all you care about: the
actual value of an AIC statistic isn’t very informative, but the differences between two AIC values
are useful, since these provide a measure of the extent to which one model outperforms another.