Simple Linear Regression Analysis: Mcgraw-Hill/Irwin

Chapter 13
Simple Linear Regression

Analysis
McGraw-Hill/Irwin
The Goal
This chapter talks about methods for

1. Measuring linear correlation between
two variables
2. Describing a linear relationship between
two variables with a linear equation
3. Making predictions with linear regression
model
4. Describing the usefulness of a linear
regression model
13-2
Different Values of the Correlation
Coefficient
13-3
Measure the linear Relationship: The Simple
Correlation Coefficient
n n n
n xi yi   xi  yi
r i 1 i 1 i 1
n n n n
n x 2  ( xi ) 2 n yi2  ( yi ) 2
i 1 i 1 i 1 i 1
The linear coefficient (or simple correlation coefficient) r is a

numerical measure of the strength of the linear relationship
between two variables representing quantitative data.
13-4
Interpret the Correlation Coefficient
r
• If r>0 we say the two variables are
positively correlated; if r<0 we say they
are negatively correlated.
• If the absolute value of r is ≥ 0.8, we
say the linear relationship is strong;
• If the absolute value of r is below 0.8
but ≥ 0.5, we say the linear relationship
is moderate.
• If the absolute value of r is below 0.5,
we say the linear relationship is weak. 13-5
Properties of the Correlation
Coefficient r
1. The value of r is always between -1 and +1.
2. The value for r does not change if all values

of either variables are converted to a
different scale.
3. The value of r is not affected by the choice

of x or y. Interchange all x and y values and
the value of r will not change.
4. r measures the strength of a linear

relationship. It is not designed to measure
the strength of a relationship that is not 13-6
The Simple Linear Regression Model
and the Least Squares Point Estimates
• The dependent (or response) variable is the
variable we wish to understand or predict,
denoted by Y
• The independent (or predictor or explanatory )
variable is the variable we will use to
understand or predict the dependent variable,
denoted by X
• Regression analysis is a statistical technique
that uses observed data to relate the dependent
variable to one or more independent variables
13-7
Form of The Simple Linear
Regression Model
• Y = β0 + β1X + ε
• β0 + β1X is the mean value of the dependent
variable Y when the value of the independent
variable is X. The mean is in the form of a
linear function. The mean determines the
overall trend of the relationship between X
and Y.
• β0 is the y-intercept, the mean of y when X is
0; β1 is the slope, the change in the mean of
Y per unit change in X
• ε is an error term that describes the effect on
Y of all factors other than X
• ŷ = b0 + b1x, ŷ is the estimate of mean value of Y 13-8
The Least Squares Estimation
Method
13-9
The Simple Linear Regression Model
Illustrated
13-10
The Least Squares Point Estimates
• Estimation/prediction equation
ŷ = b0 + b1x
• Least squares point estimate of the
slope β1
SS xy
b1 
SS xx
SS xy   ( xi  x )( yi  y )   xy 
  x   y  i i
i i
n
SS xx   ( xi  x )   x
2 2

  x i
2
i
n
13-11
The Least Squares Point Estimates
Continued
• Least squares point estimate of the y-

intercept 0
b0  y  b1 x y
 y i
x
 x i
n n
13-12
Testing the Significance of the Slope
• A regression model is not likely to be useful

unless there is a significant relationship
between x and y
• To test significance, we use the null
hypothesis:
H0: β1 = 0
• Versus the alternative hypothesis:
Ha: β1 ≠ 0
13-13
Testing the Significance of the Slope #2
Alternative Reject H0 If p-Value
Ha: β1 ≠ 0 |t| > tα/2* Twice area under t

distribution right of |t|
*
That is t > tα/2 or t < –tα/2
b1 s
t= where sb1 
sb1 SS xx
t, t/2 and p-values are based on n–2 degrees of
freedom
13-14
The Simple Coefficient of
Determination and Correlation
• How useful is a particular regression model?
• One measure of usefulness is the simple
coefficient of determination
• It is represented by the symbol r2 , because it
is actually equal to the square of (simple)
Correlation Coefficient which is denoted by r.
• It is interpreted as the percentage of
variation in Y that could be explained by the
linear regression line b0 + b1x
13-15
Prediction
• To estimate the mean value of Y for X= x0,
one just need to plug x0 into the regression
line formula and calculate the estimate of Y
by b0 + b1x0 . We usually denote the
estimated mean value of Y from the
regression line by ŷ = b0 + b1x0 and call ŷ the
fitted value for X= x0.
• window
13-16

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Chapter 13

Simple Linear Regression

This chapter talks about methods for

The linear coefficient (or simple correlation coefficient) r is a

2. The value for r does not change if all values

3. The value of r is not affected by the choice

4. r measures the strength of a linear

• Least squares point estimate of the y-

• A regression model is not likely to be useful

• Versus the alternative hypothesis:

Alternative Reject H0 If p-Value

Ha: β1 ≠ 0 |t| > tα/2* Twice area under t

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