KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI
BACHELOR OF BUSINESS ADMINISTRATION
II Sem, Quantitative Business Techniques
MODULE II REGRESSION ANALYSIS
Regression
“Regression” means returning or stepping back to the average value. With the help of values of one variable
(independent) we can establish most likely values of other variable (dependent). On the basis of two available
correlated variables, we can forecast the future data or events or values.
Regression Analysis
It refers to the methods by which estimates are made of the values of a variable from a knowledge of the values
of one or more variables and to the measurement of the errors involved in this estimation process.
Uses of Regression
[Link] and Forecasting: Regression is widely used to predict future values of a dependent variable based on known
values of independent variables. tor example, predicting future sales based on advertising spending or predicting crop
yield based on rainfall.
2. Understanding Relationships: It helps analyze and understand how one or more factors influence a particular outcome.
For example, studying how income, education, and age affect consumer spending habits.
3. Business Decision-Making: Regression analysis assists businesses in setting budgets, pricing strategies, and marketing
plans by analyzing relationships between sales, costs, and other variables.
4. Economic and Social Research: Economists and researchers use regression to study relationships like income and
consumption, population growth and employment, or education level and literacy rates.
5. Quality Control and Improvement: Manufacturing industries use regression to analyze the effect of different factors on
product quality and improve production processes.
6. Risk Analysis: Regression helps in identifying and analyzing risks by showing how changes in certain factors (like
market trends or interest rates) affect business performance.
Difference between Correlation & Regression
Basis Correlation Regression
Meaning Shows the degree and direction of Explains the relationship and predicts
relationship between two variables the value of one variable from another
Purpose To measure the strength if association To estimate or predict dependent
between variables variable based on independent variable
Direction of Relationship Correlation is mutual and does not Regression clearly identifies dependent
distinguish between dependent or and independent variables
independent variables
Result Gives a single value between +1 to -1 Provides a regression equation to
(correlation co-efficient) express the relationship
Cause and Effect Does not imply cause and effect Indicates cause and effect relationship
(though not always proof)
Type of Relationship Measures degree of relationship Measures both degree and nature of
relationship
Graphical Representation Represented by a scatter diagram Represented by a regression line (line of
best fit)
Use Used to understand how closely variables Used for forecasting and decision
move together making
Techniques of Regression
1. Regression Equation
Regression Equation are algebraic expressions of the regression lines. Since there are two regression lines,
there are two regression equations- the regression equation of X on Y us used to describe the variations in the
values of X for given changes in Y and the regression equation of Y on X is used to describe the variation in
the values of Y for given changes in X
Regression Equation of X on Y
∑𝑥𝑦
(𝑥 − 𝑥̅ ) = (𝑦 − 𝑦̅)
∑𝑦 2
Or
(𝑥 − 𝑥̅ )= bxy (𝑦 − 𝑦̅)
∑ 𝑥𝑦
bxy = =r𝜎𝑥
∑𝑦 2
𝜎𝑦
Regression Equation of Y on X
∑𝑥𝑦
(𝑦 − 𝑦̅)= 2 (𝑥 − 𝑥̅ )
∑𝑥
Or
(𝑦 − 𝑦̅)= byx (𝑥 − 𝑥̅ )
∑ 𝑥𝑦
byx = =r𝜎𝑦
∑𝑥 2
𝜎𝑥
2. Regression Lines
Regression Lines refers to describe the average relationship between the two variables say X and Y. It reveals
mean value of X for given value of Y. The equation of regression line is known as “Regression Equation”
Regression line of X on Y : X = a+ bY
Regression line of Y on X : Y= a + bX
3. Regression Co-efficient
The rate of change of variable for unit change in the other variable is called the regression coefficient of
former or latter. Since there are two regression lines there are two regression co-efficient.
The co-efficient of correlation is geometric mean of the two regression co-efficient
r = √𝑏𝑦𝑥 𝑥 𝑏𝑥𝑦
Illustrations
Regression Equation
[Link] the following data find the regression equation of Y on X and X on Y
X 5 6 8 11 3 9
Y 3 4 6 8 2 5
[Link] the following information construct both the regression lines, also Predict Y when X =43 and X when Y
=36.
X 39 31 37 41 35 45
Y 29 34 39 35 27 34
[Link] following data relates to the ages of husband and wife
Ages of Husband 25 28 30 32 35 36 38 39 42 55
Ages of Wife 20 26 29 30 25 18 26 35 35 46
a. Find the two regression equations
b. The most likely age of husband when the age of wife’s is 25
c. The most likely age of wife when the age of husband’s is 35
4. The heights (in cms) of a group of father’s and son are given below
Height of Father 158 166 163 165 167 170 167 152 177 185
Height of Son 163 158 167 170 160 180 170 175 172 175
Find the lines of regression and estimate the height on son when the height of father is 164 cms.
5. Draw two regression equations from the following data given below and also determine the co-efficient
of correlation between the X and Y variable
X 32 35 34 38 36 29 31 28 32 25
Y 39 49 33 30 32 31 36 46 41 43
6. The correlation co-efficient between the variables X and Y is 0.60, 𝜎 𝑥 = 1.50, 𝜎 𝑦 = 2, 𝑥̅ = 10,
𝑦̅ = 20. Calculate two regression equation.
7. Find the most likely production corresponding to a rainfall 40” from the following data
Details Rainfall Production
Average 30” 500 kg
Standard Deviation 5” 100 kg
Co-efficient 0.70
8. You are given the following data:
Variables X Y
Mean 47 96
Variance 64 81
Correlation co-efficient between X and Y 0.36
Calculate the regression line X on Y and also calculate X when Y=88
9. If byx = 0.80, bxy = 0.60. Obtain ‘r’
10. Find ‘r’ when two regression co-efficient are -0.70 and -0.1
11. The correlation co-efficient between the variables X and Y is 0.60, 𝜎 𝑥 = 1.50, 𝜎 𝑦= 2, 𝑥̅ = 10, 𝑦̅= 20
calculate two regression equations from the following data.