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10th Edition
Chapter 13
Simple Linear Regression
Chap 13-1
Learning Objectives
In this chapter, you learn:
Introduction to
Regression Analysis
Types of Relationships
Linear relationships
Y
Curvilinear relationships
Y
X
Y
X
Y
Types of Relationships
(continued)
Strong relationships
Y
Weak relationships
Y
X
Y
X
Y
Types of Relationships
(continued)
No relationship
Y
X
Y
Population
Slope
Coefficient
Independent
Variable
Random
Error
term
Yi 0 1Xi i
Linear component
Random Error
component
(continued)
Yi 0 1Xi i
Observed Value
of Y for Xi
Predicted Value
of Y for Xi
Slope = 1
Random Error
for this Xi value
Intercept = 0
Xi
Estimate of
the regression
Estimate of the
regression slope
intercept
Yi b0 b1Xi
Value of X for
observation i
2
2
Interpretation of the
Slope and the Intercept
Square Feet
(X)
245
1400
312
1600
279
1700
308
1875
199
1100
219
1550
405
2350
324
2450
319
1425
255
1700
Graphical Presentation
Excel Output
Regression Statistics
Multiple R
0.76211
R Square
0.58082
Adjusted R Square
0.52842
Standard Error
41.33032
Observations
ANOVA
10
df
SS
MS
F
11.0848
Regression
18934.9348
18934.9348
Residual
13665.5652
1708.1957
Total
32600.5000
Coefficients
Intercept
Square Feet
Standard Error
t Stat
P-value
Significance F
0.01039
Lower 95%
Upper 95%
98.24833
58.03348
1.69296
0.12892
-35.57720
232.07386
0.10977
0.03297
3.32938
0.01039
0.03374
0.18580
Select
Stat / Regression / Regression
(continued)
Minitab Output
Minitab output:
Regression equation
Graphical Presentation
Intercept
= 98.248
Interpretation of the
Intercept, b0
house price 98.24833 0.10977 (square feet)
Interpretation of the
Slope Coefficient, b1
house price 98.24833 0.10977 (square feet)
Predictions using
Regression Analysis
Predict the price for a house
with 2000 square feet:
Do not try to
extrapolate
beyond the range
of observed Xs
Measures of Variation
SST
SSR
Total Sum of
Squares
Regression Sum
of Squares
SST ( Yi Y )2
SSR ( Yi Y )2
SSE
Error Sum of
Squares
SSE ( Yi Yi )2
where:
Y
i = Predicted value of Y for the given Xi value
Measures of Variation
(continued)
Measures of Variation
(continued)
Y
Yi
SSE = (Yi - Yi )2
Xi
_
Y
Coefficient of Determination, r2
SST
total sum of squares
2
note:
0 r 1
2
Examples of Approximate
r2 Values
Y
r2 = 1
r2 = 1
r =1
2
Examples of Approximate
r2 Values
Y
0 < r2 < 1
Examples of Approximate
r2 Values
r2 = 0
No linear relationship
between X and Y:
r2 = 0
Minitab Output
r2
SSR 18935
0.581
SST 32600
S YX
SSE
n2
(
Y
Y
)
i i
i1
Where
SSE = error sum of squares
n = sample size
n2
Minitab Output
S YX 41.3303
small s YX
large s YX
Assumptions of Regression
Use the acronym LINE:
Linearity
Independence of Errors
Normality of Error
Residual Analysis
ei Yi Yi
Not Linear
residuals
residuals
Linear
residuals
residuals
residuals
Independent
X
100
0
-3
-2
-1
Residual
x
Non-constant variance
residuals
residuals
Constant variance
Measuring Autocorrelation:
The Durbin-Watson Statistic
Autocorrelation
(e e
i 2
2
e
i
i1
i 1
Inconclusive
dL
Do not reject H0
dU
(continued)
Is there autocorrelation?
Durbin-Watson Calculations
Sum of Squared
Difference of Residuals
3296.18
Sum of Squared
Residuals
3279.98
Durbin-Watson
Statistic
1.00494
n
(e e
i 2
ei
i 1
i1
)2
3296.18
1.00494
3279.98
(continued)
Minitab Output
(continued)
Inconclusive
dL=1.29
Do not reject H0
dU=1.45
S YX
Sb1
SSX
S YX
(X X)
where:
Sb1
S YX
SSE
Minitab Output
Minitab output:
Sb1 0.03297
small Sb1
large Sb1
Test statistic
b1 1
t
Sb1
d.f. n 2
where:
b1 = regression slope
coefficient
1 = hypothesized slope
Sb 1= standard
error of the slope
Square Feet
(x)
245
1400
312
1600
279
1700
308
1875
199
1100
219
1550
405
2350
324
2450
319
1425
255
1700
H1: 1 0
Coef
Constant
Square Feet
Sb1
b1
SE Coef
98.245
58.03
1.69
0.129
0.10977
0.03297
3.33
0.010
b1 1 0.10977 0
t
3.33
t
Sb1
0.03297
H0: 1 = 0
H1: 1 0
Coef
Constant
Square Feet
d.f. = 10-2 = 8
/2=.025
Reject H0
/2=.025
Do not reject H0
-t/2
-2.3060
Reject H
0
t/2
2.3060 3.33
b1
Sb1
SE Coef
t
P
98.25
58.03
1.69
0.129
0.10977
0.03297
3.33
0.010
Decision:
Reject H0
Conclusion:
There is sufficient evidence
that square footage affects
house price
P-value = 0.010
H0: 1 = 0
H1: 1 0
Coef
Constant
Square Feet
P-value
SE Coef
98.25
58.03
1.69
0.129
0.10977
0.03297
3.33
0.010
F Test statistic:
where
MSR
F
MSE
MSR
SSR
k
MSE
SSE
n k 1
Minitab Output
MSR 18935
F
11.08
MSE 1708
With 1 and 8 degrees
of freedom
P-value for
the F Test
Test Statistic:
H 0 : 1 = 0
MSR
F
11.08
MSE
H 1 : 1 0
= .05
df1= 1
df2 = 8
Decision:
Reject H0 at = 0.05
Critical
Value:
F = 5.32
Conclusion:
= .05
Do not
reject H0
Reject H0
F.05 = 5.32
b1 t n2Sb1
d.f. = n - 2
SE Coef
Lower 95%
Upper 95%
98.25
58.03
1.69
0.129
-35.57720
232.07386
0.10977
0.03297
3.33
0.010
0.03374
0.18580
0.10977 (2.3060)(0.03297)
(continued)
Hypotheses
H0: = 0 (no correlation between X and Y)
HA: 0 (correlation exists)
Test statistic
r -
t (with
n 2 degrees of freedom)
2
where
1 r
r r
n2
if b1 0
r r 2 if b1 0
(No correlation)
H1: 0
(correlation exists)
=.05 , df = 10 - 2 = 8
r
1 r 2
n2
.762 0
1 .762 2
10 2
3.329
r
1 r 2
n2
.762 0
1 .762 2
10 2
3.329
Conclusion:
There is
evidence of a
linear association
at the 5% level of
significance
d.f. = 10-2 = 8
/2=.025
Reject H0
-t/2
-2.3060
/2=.025
Do not reject H0
Reject H0
t/2
2.3060
Decision:
Reject H0
3.329
Y = b0+b1Xi
Prediction Interval
for an individual Y,
given Xi
Xi
1 (Xi X)2 1
(Xi X)2
hi
n
SSX
n (Xi X)2
Y t n-2S YX
1
(Xi X)2
317.85 37.12
2
n (Xi X)
Y t n-1S YX
1
(Xi X)2
1
317.85 102.28
2
n (Xi X)
(continued)
Minitab Output:
Confidence Interval
Prediction Interval
(continued)
Chapter Summary
Chapter Summary
(continued)