Scribd
Upload
6 views4 pages

Excel Linear Regression Analysis Guide

This document provides a step-by-step guide on performing linear regression analysis in Excel to determine the relationship between Quantity Sold and the independent variables Price and Advertising. It explains how to interpret the Summary Output, including R Square, Significance F, P-values, coefficients, and residuals. The analysis shows that 96% of the variation in Quantity Sold can be explained by Price and Advertising, and offers a regression equation for forecasting sales.

Uploaded by

questiones11
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
6 views4 pages

Excel Linear Regression Analysis Guide

This document provides a step-by-step guide on performing linear regression analysis in Excel to determine the relationship between Quantity Sold and the independent variables Price and Advertising. It explains how to interpret the Summary Output, including R Square, Significance F, P-values, coefficients, and residuals. The analysis shows that 96% of the variation in Quantity Sold can be explained by Price and Advertising, and offers a regression equation for forecasting sales.

Uploaded by

questiones11
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

R Square | Significance F and P-Values | Coefficients | Residuals

This example teaches you how to run a linear regression analysis in Excel and how to
interpret the Summary Output.

Below you can find our data. The big question is: is there a relation between Quantity
Sold (Output) and Price and Advertising (Input). In other words: can we predict
Quantity Sold if we know Price and Advertising?

1. On the Data tab, in the Analysis group, click Data Analysis.

Note: can't find the Data Analysis button? Click here to load the Analysis ToolPak add-
in.

2. Select Regression and click OK.

3. Select the Y Range (A1:A8). This is the predictor variable (also called dependent
variable).
4. Select the X Range(B1:C8). These are the explanatory variables (also called
independent variables). These columns must be adjacent to each other.

5. Check Labels.

6. Click in the Output Range box and select cell A11.

7. Check Residuals.

8. Click OK.

Excel produces the following Summary Output (rounded to 3 decimal places).

R Square

R Square equals 0.962, which is a very good fit. 96% of the variation in Quantity Sold
is explained by the independent variables Price and Advertising. The closer to 1, the
better the regression line (read on) fits the data.
Significance F and P-values

To check if your results are reliable (statistically significant), look at Significance F


(0.001). If this value is less than 0.05, you're OK. If Significance F is greater than 0.05,
it's probably better to stop using this set of independent variables. Delete a variable with
a high P-value (greater than 0.05) and rerun the regression until Significance F drops
below 0.05.

Most or all P-values should be below below 0.05. In our example this is the case.
(0.000, 0.001 and 0.005).

Coefficients

The regression line is: y = Quantity Sold = 8536.214 -835.722 * Price + 0.592 *
Advertising. In other words, for each unit increase in price, Quantity Sold decreases
with 835.722 units. For each unit increase in Advertising, Quantity Sold increases with
0.592 units. This is valuable information.

You can also use these coefficients to do a forecast. For example, if price equals $4 and
Advertising equals $3000, you might be able to achieve a Quantity Sold of 8536.214 -
835.722 * 4 + 0.592 * 3000 = 6970.

Residuals

The residuals show you how far away the actual data points are fom the predicted data
points (using the equation). For example, the first data point equals 8500. Using the
equation, the predicted data point equals 8536.214 -835.722 * 2 + 0.592 * 2800 =
8523.009, giving a residual of 8500 - 8523.009 = -23.009.
You can also create a scatter plot of these residuals.

You might also like