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Linear Regression

In: Business and Management

Submitted By Praew35
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Simple linear regression is a model with a single regressor x that has a relationship with a response y that is a straight line. This simple linear regression model is y = β0 + β1x + ε where the intercept β0 and the slope β1 are unknown constants and ε is a random error component.

Testing Significance of Regression: H0: β1 = 0, H1 : β1 ≠ 0
The hypotheses relate to the significance of regression. Failing to reject H0: β1 = 0 implies that there is no linear relationship between x and y. On the other hand, if H0: β1 = 0 is rejected, it implies that x is of value in explaining the variability in y.

The following equation is the Fundamental analysis-of-variance identity for a regression model.


Analysis of variance (ANOVA) is a collection of statistical models used in order to analyze the differences between group means and their associated procedures (such as "variation" among and between groups), developed by R. A. Fisher. In the ANOVA setting, the observed variance in a particular variable is partitioned into components attributable to different sources of variation.

P value or calculated probability is the estimated probability of rejecting the null hypothesis (H0) of a study question when that hypothesis is true.

VIF (the variance inflation factor) for each term in the model measures the combined effect of the dependences among the regressors on the variance of the term. Practical experience indicates that if any of the VIFs exceeds 5 or 10, it is an indication that the associated regression coefficients are poorly estimated because of multicollinearity. (pg. 296)

R-squared is a statistical measure of how close the data are to the fitted regression line. It is also known as the coefficient of determination, or the coefficient of multiple determination for multiple regression.
The definition of...

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