chpt 14 Flashcards
What does simple linear regression use
- one independent variable and one dependent variable
2. uses a straight line to approximate the relationship
What does multiple regression use
- 2 or more independent variables
What are the 2 objectives for simple linear regression
- establish if there is a relationship b/w 2 variables (ie income and spending)
- Forecast new observations (ie. sales over next Qrt)
What is the dependent variable denoted by
y
what is the independent variable denoted by
x
what is the dependent variable
the variable being predicted
what is the independent variable
the variable(s) used to predict the values of the dependent variable
What is the formula for the simple linear regression
Y = B0 + B1X + E
What does Y represent in the simple linear regression model
the dependent variable
what does B0 represent in the simple linear regression model
intercept or constant
what does B1x represent
coefficient of x or slope of x
what does E represent in the simple linear regression model
error term
What does the error term account for in the simple linear regression model
accounts for the variability in y that can’t be explained by the linear relationship b/w x and y
What is the simple linear regression equation
E(y) = B- + B1x
What does E(y) represent
mean or expected value of y for a given value of x
What can we note about B0 adn B1 in the simple linear regression equation
they are known
What is the estimate simple linear regression equation
y hat = b0 + b1x
When do we use the estimate simple linear regression equation
when B0 and B1 are NOT known
What does y hat represent in the estimate simple linear regression equation
point estimate of E(y)
- provides a prediction of an individual value of y for a given value of x
What are B0 and B1
population parameters
what are b0 and b1
sample statistics to estimate B0 and B1
IF we are trying to predict sales for a given level of advertising what is the dependent and independent variable
Dependent variable - sales (y)
Independent variable - advertising expenditures (x)
what does “simple” indicate in simple linear regression
one independent variable and one dependent variable
What does “linear” Indicate in Simple linear regression
the relationship is approximated using a straight line
What is B0 in the simple linear regression model
the y-intercept of the regression line or the value of y when x is 0
What is B1 in the simple linear regression model
the slope of the regression line
- the line tells us two things
1. whether the line is increasing or decreasing
2. how steep it is
What is E in the simple linear regression model
the error term
- as good as our model might be, there is always random error term that cannot be accounted for
if the line slopes upward, what is the relationship
as x increases, so does y - positive relationship
B1 - will be positive
if the line slopes downward, what is the relationship
as x increases, y decreases, negative relationship
B1 - would be negative
what if the line is straight across (the regression line is flat)
no relationship, as x increases, y remains the same
B1 is 0
What are the POPULATION parameters for the y intercept and the slope
B0 and B1
what are the sample statistics used to estimate B0 and B1
b0 and b1
what does y hat represent in the simple linear regression
the predicted value of y for a given x value
what is the estimated simple linear regression equation
y hat = b0 +b1x
What does the Coefficient of Determination tell us about the estimated regression equation
how well does the estimated regression equation fit the data
What does the Coefficient of Determination provides us with
a measure of the goodness of fit
in Coefficient of determination, what is the ith residual
the predicted value of the dependent variable y hat i
for the ith observation, the residual is indicated by what
yi- y hat i
What is the formula for the coefficient of determination
r squared = SSR/SST
what does r squared represent
the coefficient of determination
What does SSR stand for in coefficient of determination
sum of squares due to regression
what does SST stand for in Coefficient of determination
sum of squares for the total deviation
What is the formula for SSR in coefficient of determination
sum (y hat i - y bar) squared
what does the SSR in coefficient of determination measure
the difference b/w the predicted values and the average or
how much the y hat values on teh estimated regression line deviates from y hat
What does SSE in coefficient of determination stand for
sum of squares due to Error
What is the formula in Coefficient of determination for SST
sum (yi - ybar) squared
what is the formula in Coefficient of determination for SSE
sum (yi - y hat i) squared
In Coefficient of determination, how do you calculate SST
SST = SSR + SSE
What should we expect regarding SST, SSR and SSE in the coefficient of determination
we should expect that SST, SSR and SSE related from
What would be a perfect fit in coefficient of determination
SSR = SST
SSR / SST = 1
What would a poor fit be in coefficient of determination
large values for SSE
- poorest fit when SSR = 0 and SSE = SST
What is r squared
percent of variability in y can be explained by x
if r squared = 95.5%, what can we say
95.5% of the variability in grades for instance, can be explained by the number of hours studied
What does the correlation Coefficient measure
it measures the strength of association b/w x and y
What does the correlation Coefficient measure
it measures the strength of association b/w x and y
what is the correlation Coefficient denoted by
r
what are the values of r in correlation Coefficient
between -1 and +1
In Correlation Coefficient, if r = 1, what does this mean
means perfect positive linear relationship b/w x and y
- no deviation
- all the data points from the sample lay exactly on the line of regression with no deviation and the line slopes upward
In Correlation Coefficient, if r = -1, what does this mean
means perfect negative linear relationship b/w x and y
- no deviation
- all data points from the sample lay exactly on the line of regression with no deviation and the line slopes downward
In Correlation Coefficient, if r = 0, what does this mean
no relationship b/w x and y
what is the formula for correlation Coefficient
rxy = (sign of b1)x square root of coefficient of determination
or
rxy = (sing of b1) x square root of rsqaured
in correlation Coefficient, what is b1
slope of the estimate
In correlation coefficient, since the square root of anything doesn’t tell us if the number was negative or postive we have to look at what
the slope and then we use the sign for our slope
example b1 is positive 4.74 then we use positive sign
rxy = +.9505
if rxy is .9749 what does this indicate
a very strong positive linear relationship bw x and y
Testing for Significance if y=B0+B1x +E
if B1 = 0 then Y=
B0 no matter what value x is
- the value of y does not depend on x
(no linear relationship b/w x and y)
What is the null hypothesis and the alternative for testing significance in Simple Linear Regression
Ho= B1 = 0 Ha = B1 does not = 0
What test do we use when testing for signfiicanace in simple linear regression
t test
what is the formula for the test statitistic when testing for significance in simple linear regression
t = b1 / sb1
what does sb1 stand for
standard error for slope
what is the formula for sb1 (the standard error for the slope)
sb1 = s (standard deviation) / square root sum (xi - xbar)squared
what is the formula for s in sb1
s = square root of (SSE/n-2)
Coefficient of determination - Definition
A measure of the goodness of fit of the estimated regression equation. It can be interpreted as the proportion of the variability in the dependent variable y that is explained by the estimated regression equation
Confidence interval - Definition
The interval estimate of the mean value of y for a given value of x.
Correlation coefficient - Definition
A measure of the strength of the linear relationship between two variables