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Regression and Correlation Analysis

Regression analysis involves identifying the relationship between a dependent variable and one or more independent variables. A regression model is hypothesized and parameter estimates are used to develop an estimated regression equation. Tests are employed to determine if the model is satisfactory for predicting the dependent variable given values of the independent variables. Simple linear regression models the relationship between a single dependent variable y and independent variable x as y = a0 + a1x + ε. Correlation and regression analysis are related in that they both deal with relationships among variables, but cannot establish cause-and-effect relationships.

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60 views2 pages

Regression and Correlation Analysis

Regression analysis involves identifying the relationship between a dependent variable and one or more independent variables. A regression model is hypothesized and parameter estimates are used to develop an estimated regression equation. Tests are employed to determine if the model is satisfactory for predicting the dependent variable given values of the independent variables. Simple linear regression models the relationship between a single dependent variable y and independent variable x as y = a0 + a1x + ε. Correlation and regression analysis are related in that they both deal with relationships among variables, but cannot establish cause-and-effect relationships.

Uploaded by

Muni Sankar Matam
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© © All Rights Reserved
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Regression and correlation analysis:

Regression analysis involves identifying the relationship between a dependent


variable and one or more independent variables. A model of the relationship is
hypothesized, and estimates of the parameter values are used to develop an estimated
regression equation. Various tests are then employed to determine if the model is
satisfactory. If the model is deemed satisfactory, the estimated regression equation can
be used to predict the value of the dependent variable given values for the independent
variables.

Regression model.

In simple linear regression, the model used to describe the relationship between a
single dependent variable y and a single independent variable x is y = a 0 + a1x + k.
a0and a1 are referred to as the model parameters, and is a probabilistic error term that
accounts for the variability in y that cannot be explained by the linear relationship
with x. If the error term were not present, the model would be deterministic; in that
case, knowledge of the value of x would be sufficient to determine the value of y.

Least squares method.

Either a simple or multiple regression model is initially posed as a hypothesis


concerning the relationship among the dependent and independent variables. The least
squares method is the most widely used procedure for developing estimates of the
model parameters.

As an illustration of regression analysis and the least squares method, suppose a


university medical centre is investigating the relationship between stress and blood
pressure. Assume that both a stress test score and a blood pressure reading have been
recorded for a sample of 20 patients. The data are shown graphically in the figure
below, called a scatter diagram. Values of the independent variable, stress test score,
are given on the horizontal axis, and values of the dependent variable, blood pressure,
are shown on the vertical axis. The line passing through the data points is the graph of
the estimated regression equation: y = 42.3 + 0.49x. The parameter estimates, b0 =
42.3 and b1 = 0.49, were obtained using the least squares method.
Correlation.

Correlation and regression analysis are related in the sense that both deal with
relationships among variables. The correlation coefficient is a measure of linear
association between two variables. Values of the correlation coefficient are always
between -1 and +1. A correlation coefficient of +1 indicates that two variables are
perfectly related in a positive linear sense, a correlation coefficient of -1 indicates that
two variables are perfectly related in a negative linear sense, and a correlation
coefficient of 0 indicates that there is no linear relationship between the two variables.
For simple linear regression, the sample correlation coefficient is the square root of
the coefficient of determination, with the sign of the correlation coefficient being the
same as the sign of b1, the coefficient of x1 in the estimated regression equation.

Neither regression nor correlation analyses can be interpreted as establishing cause-


and-effect relationships. They can indicate only how or to what extent variables are
associated with each other. The correlation coefficient measures only the degree of
linear association between two variables. Any conclusions about a cause-and-effect
relationship must be based on the judgment of the analyst.

Excerpt from the Encyclopedia Britannica without permission.

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