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Example of Simple Linear Regression

Linear regression quantifies the relationship between predictor variables and an outcome variable. It is commonly used for predictive analysis and modeling, such as quantifying the impact of factors like age, gender, and diet on height. Linear regression estimates equations to model the relationship between variables, such as an equation estimating sales based on advertising expenditure and year for a clothing company. It can be used for both simple linear regression with one predictor variable or multiple linear regression with multiple predictor variables.

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Inderpal Singh
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284 views

Example of Simple Linear Regression

Linear regression quantifies the relationship between predictor variables and an outcome variable. It is commonly used for predictive analysis and modeling, such as quantifying the impact of factors like age, gender, and diet on height. Linear regression estimates equations to model the relationship between variables, such as an equation estimating sales based on advertising expenditure and year for a clothing company. It can be used for both simple linear regression with one predictor variable or multiple linear regression with multiple predictor variables.

Uploaded by

Inderpal Singh
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Linear regression

 
Linear regression  quantifies the relationship between one or
more predictor variable(s)  and one outcome variable.  Linear regression is
commonly used for predictive analysis and modeling. For example, it can
be used to quantify the relative impacts of age, gender, and diet (the
predictor variables) on height (the outcome variable).  Linear regression is
also known as multiple regression, multivariate regression, ordinary least
squares (OLS), and regression. This post will show you examples of linear
regression, including an example of simple linear regression and an
example of multiple linear regression.
Example of simple linear regression
The table below shows some data from the early days of the Italian
clothing company Benetton. Each row in the table shows Benetton’s sales
for a year and the amount spent on advertising that year. In this case, our
outcome of interest is sales—it is what we want to predict. If we use
advertising as the predictor variable, linear regression estimates that Sales
= 168 + 23 Advertising. That is, if advertising expenditure is increased
by one Euro, then sales will be expected to increase by 23 million Euros,
and if there was no advertising we would expect sales of 168 million Euros.

Example of multiple linear regression


Linear regression with a single predictor variable is known as simple
regression.  In real-world applications, there is typically more than one
predictor variable. Such regressions are called multiple regression.  For
more information, check out this post on why you should not use multiple
linear regression for Key Driver Analysis with example data for multiple
linear regression examples.
Returning to the Benetton example, we can include year variable in the
regression, which gives the result that Sales = 323 + 14 Advertising +
47 Year. The interpretation of this equation is that every extra million
Euro of advertising expenditure will lead to an extra 14 million Euro of
sales and that sales will grow due to non-advertising factors by 47 million
Euro per year.

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