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Wait a minute… what is linear regression?

Linear regression analysis is used to predict the value of a variable based on the value of another variable. The variable you want to predict is called the dependent variable. The variable you are using to predict the other variable’s value is called the independent variable.
This form of analysis estimates the coefficients of the linear equation, involving one or more independent variables that best predict the value of the dependent variable. Linear regression fits a straight line or surface that minimizes the discrepancies between predicted and actual output values. There are simple linear regression calculators that use a “least squares” method to discover the best-fit line for a set of paired data. You then estimate the value of X (dependent variable) from Y (independent variable).

Why linear regression

Why linear regression is important

Linear-regression models are relatively simple and provide an easy-to-interpret mathematical formula that can generate predictions. Linear regression can be applied to various areas in business and academic study.
You’ll find that linear regression is used in everything from biological, behavioral, environmental and social sciences to business. Linear-regression models have become a proven way to scientifically and reliably predict the future. Because linear regression is a long-established statistical procedure, the properties of linear-regression models are well understood and can be trained very quickly.

Key assumptions of effective linear regression

Assumptions to be considered for success with linear-regression analysis:

  • For each variable: Consider the number of valid cases, mean and standard deviation.
  • For each model: Consider regression coefficients, correlation matrix, part and partial correlations, multiple R, R2, adjusted R2, change in R2, standard error of the estimate, analysis-of-variance table, predicted values and residuals. Also, consider 95-percent-confidence intervals for each regression coefficient, variance-covariance matrix, variance inflation factor, tolerance, Durbin-Watson test, distance measures (Mahalanobis, Cook and leverage values), DfBeta, DfFit, prediction intervals and case-wise diagnostic information.
  • Plots: Consider scatterplots, partial plots, histograms and normal probability plots.
  • Data: Dependent and independent variables should be quantitative. Categorical variables, such as religion, major field of study or region of residence, need to be recoded to binary (dummy) variables or other types of contrast variables.
  • Other assumptions: For each value of the independent variable, the distribution of the dependent variable must be normal. The variance of the distribution of the dependent variable should be constant for all values of the independent variable. The relationship between the dependent variable and each independent variable should be linear and all observations should be independent.
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