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Regression Analysis

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Last updated date: 16th Apr 2024
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Introduction

In this article, we are going to learn about regression analysis, why it is such an important concept in the subject of statistics. It is among the most powerful methods in this subject that are used to determine the connection or link between different variables. Then these links are used to forecast observations of the future.

In this article, we will learn more about this method, how different companies use this method, what are the various types of regression analysis, and much more about this type of data analysis.


What is Regression Analysis?

When we define this analysis, we say it is a method that is used to estimate the relationship between one or more independent variables and a dependent variable. These independent variables can be defined as an assumption or driver that is altered to evaluate its influence on a dependent variable which is the result or the outcome.


In simple terms, regression analysis is a mathematical method of sorting out which independent variables have an impact on the outcome. This method answers various questions including:

  • Which of these factors matter the most?

  • Which factors don’t matter much and can be ignored/ discarded?

  • How do these factors relate and how do they interact with one another?


One Regression Analysis Example that can be Given is:

Imagine you are a manager that is trying to forecast the subsequent month’s numbers. Knowing that countless factors can affect the final numbers at the month, you try to think about all the various options. Some of the factors you know are the weather, competition, and much more. Some in your company agree and conclude that ‘the more rain there is, the higher the numbers will be’, etc.

In this example, the dependent variable would be the final numbers of the month and the independent ones are weather, competitors, etc. Using such information, you can create a regression analysis PDF so you can use the data later on when you need it for other work.


What are the Different Types of Regression Analysis?

There are three types which are:

  1. Linear regression forecast Y responses from an X variable. It creates the relationship between two variables with the help of a straight line. This method uses one independent variable to forecast the result of the dependent variable which is Y.

  2. Multiple linear regression is also known as multiple regression analysis. It is very rare for a dependent variable to be affected by only one variable. This can be linear or non-linear and it is grounded on the assumptions that there is a linked connection between the two sorts of variables. This type also assumes that there isn’t any major correlation between the independent variables which are used.

  • Simple linear regression: Y = a + bX + u

  • Multiple linear regression: Y = a + b₁X₁ + b₂X₂ + b₃X₃ + … +bₜXₜ + u

Where:

Y = the variable that you trying to predict (dependent variable).

X = the variable that you using to predict (independent variable).

a = the intercept.

b = the slope.

u = the regression residual

  1. Nonlinear regression analysis is the type in which the data is fit to a model and then that data is articulated as a mathematical function. It relates the 2 variables in a nonlinear relationship which is a curve. The main goal of this is to make the summation of the squares as minor as possible.  This sum of squares is a measure that keeps track of how far the Y observations vary from the curved function which is used to forecast the Y.  in simple terms, it is a curved function of variable X and is used to forecast variable Y.  They can show an estimate of population growth, for example.

These are the 3 main types of regression analysis that are very important and need to be revised thoroughly.

In this article, we learned quite a bit about regression analysis and much more about how everything works.


Fun Facts

  • Did you know that this method is not only used for looking for trends it is also a very useful hack for finding the nth term in a quadratic sequence? 

  • Did you know that Francis Galton coined the term "regression" in the nineteenth century to describe a biological phenomenon?

  • Did you know regression analysis is one of the most reliable methods of identifying the impact of variables on a topic of interest? 

  • Did you know regression analysis is mainly used to find the cause and effect relationship between variables, forecasting, and time series modeling?

FAQs on Regression Analysis

1. What are the different uses of regression analysis?

There are quite a few uses of this analysis. Nearly everyone and all industries/ sectors use this evaluation because it helps to analyze the various factors that can affect the outcome that people wait for. Now that we know what regression analysis is, we need to know what are the uses.


This method helps in the financial forecasting of housing prices, stock prices, and much more. This method can be quite important to brokers or people in the stock market because they use the concept of estimation in their sectors to ensure that they always benefit and avoid any factor which can lead to anything otherwise.


Another one of the uses of regression analysis is using it for sales and promotion forecasting, weather analysis and prediction, decision making of opening a new branch in a new place, etc. There is an abundance of uses of this analysis method.

2. Explain what is multiple regression analysis?

This is a statistical method that can be used to examine the connection between a dependent variable and numerous independent variables. The main goal of this analysis method is to use the independent variables that are identified to forecast the value of the dependent value – there is only one dependent value.


In multiple regression analysis, the forecasted value is weighed and the weight signifies their input to the general estimate comparatively. This is a type of linear regression analysis. This method is used by various sectors and different types of people that need the concept of estimation and forecasting in their lives when doing anything. Regression is a very interesting topic that you can learn more in-depth about if you are interested. There are many regression analysis pdf's that you can learn from.