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To understand Regression Models using first principles thinking

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abdishakur jimale
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11 views

To understand Regression Models using first principles thinking

Uploaded by

abdishakur jimale
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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To understand Regression Models using first principles thinking, we'll

break down the topic to its fundamental elements, build up key concepts
logically, and then explain their interconnectedness. This approach focuses
on distilling the topic to its core ideas, like building blocks, to develop a solid,
intuitive understanding.

Step 1: What is Regression?

Fundamental Concept:

 Regression is a statistical method used to understand relationships


between variables and predict an outcome based on one or more
predictors (also called features).

Why do we care?

 It helps to determine how changes in one or more variables


(predictors) impact the value of another variable (outcome). It is a
powerful tool for modeling and making predictions based on data.

Step 2: Basic Terminology

1. Independent Variable (Predictor/Feature): These are the inputs or


factors that might influence the outcome. For example, in a model
predicting house prices, predictors could be square footage, number of
bedrooms, etc.

2. Dependent Variable (Response/Outcome): This is the output you


are trying to predict or explain. Continuing the house example, this
could be the house price.

3. Model: A mathematical representation that maps inputs (predictors) to


an output (outcome).

Step 3: Simple Linear Regression

Principle:

 The simplest form of regression is simple linear regression, which


involves one predictor (X) and one outcome (Y). It assumes a linear
relationship between X and Y.

Equation:

Y=β0+β1X+ϵY = \beta_0 + \beta_1X + \epsilonY=β0+β1X+ϵ

 β0\beta_0β0 (Intercept): The predicted value of Y when X = 0.


 β1\beta_1β1 (Slope): How much Y changes for a one-unit change in X.

 ϵ\epsilonϵ (Error Term): The difference between the predicted and


actual values of Y.

Conceptual Explanation:

 Think of a straight line fitted through data points in a scatter plot. The
slope (β1\beta_1β1) tells you how steeply Y changes as X changes.

Step 4: Breaking Down the Regression Process

1. Collecting Data

 Start with observed data points (X, Y pairs).

2. Fitting the Model

 Use an optimization method (like minimizing the sum of squared


errors) to find the best values of β0\beta_0β0 and β1\beta_1β1.

3. Evaluating the Fit

 Assess how well the line explains the variation in Y using metrics like:

o R-squared: Proportion of variance in Y explained by X.

o Residual Analysis: The differences between observed and


predicted values (should be randomly distributed if the model fits
well).

Step 5: Moving to Multiple Regression

Principle:

 Multiple Linear Regression extends simple linear regression to


include multiple predictors (X1, X2, ..., Xn).

Equation:

Y=β0+β1X1+β2X2+…+βnXn+ϵY = \beta_0 + \beta_1X_1 + \beta_2X_2 + \


ldots + \beta_nX_n + \epsilonY=β0+β1X1+β2X2+…+βnXn+ϵ

 Now, the outcome Y depends on a linear combination of several


predictors.

Step 6: Assumptions of Regression Models

1. Linearity: The relationship between predictors and outcome is linear.


2. Independence: Observations are independent of each other.

3. Homoscedasticity: The variance of residuals (errors) is consistent


across all values of predictors.

4. Normality of Errors: Residuals should follow a normal distribution.

Step 7: Practical Considerations

1. Feature Selection: Not all predictors may be relevant; selecting the


most influential ones is key.

2. Overfitting: If a model becomes too complex, it can fit noise in the


data rather than true relationships. Regularization techniques like
Lasso and Ridge Regression can help prevent overfitting.

3. Interpretability: The coefficients (βi\beta_iβi) give insights into how


much each predictor affects the outcome.

Step 8: Extensions Beyond Linear Regression

 Polynomial Regression: Models non-linear relationships by adding


polynomial terms of predictors.

 Logistic Regression: Used when the outcome variable is categorical


(e.g., yes/no, 0/1).

Summary of the Ground-Up Approach:

1. Regression models seek to establish a relationship between


variables.

2. Linear regression (simple and multiple) is the foundational model,


assuming a linear relationship.

3. Model fitting and evaluation ensure that predictions are


meaningful.

4. Extensions provide flexibility for different types of data and


relationships.

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