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AND CORRELATION
BY : SOEWONO, DRS.
SUMMARY
SIMPLE LINEAR REGRESSION
Managerial decisions
What is SLR ?
LSM
This line is called : the least squares line or the the fitted line or
the regression line
The difference between the points and the line are called
residuals.
The minimized sum of squared difference is called SSE, the sum
of squares for error
sum of squares
due to error
1. Introduction
John Maynard Keynes, a great British economist, wanted to
explain fluctuations in consumer spending. He believed that
consumer spending was one of the keys to understanding
economic booms and busts. Keynes hypothesized that
household income was the primary determinant of household
spending.
When income goes up, people spend more; when their income
drops, they spend less.
A simple algebraic representation of Keyness theory is :
Y=+X
Where Y is consumer spending and X is income; and are
two unknown parameters that describe the relationship
between income and consumption.
Income is the explanatory variable, because changes in
spending. Spending is the dependent variable, because
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spending depends on income.
Positive Relationship
Y
4
Y
2
1.5
0.5
X
0
Y 1increases
as
2
3 X increases
4
5
6
Y
4
Negative Relationship
X
Y decreases
X increases
0 0.2 0.4
0.6 0.8 1as1.2
1.4 1.6 1.8 2
No Relationship
3
2
1
0
X
isnt0.6
affected
0 0.2Y0.4
0.8 by
1 X1.2 1.4
that relates
i = 1,2,.,n
i = 1,2,,n
i = a + b x
a= -b
3.5 y
3
di = yi - i = ei
2.5
2
(x1, y1)
(x2, 2)
(xi, i)
(xn, yn)
xi
2
xn
2.5
( , )
1.5
1
0.5
0
0
x1
0.5
x2
1
1.5
x
3
Predictor
Predicted
Independent variable
Dependent variable
Explanatory variable
Explained variable
Stimulus
Response
Exogenous
Endogenous
Known variable
Unknown variable
where
Yi = actual value of Y for observation i
i = predicted value of Y for observation i
Since
i = a + b Xi , we are minimizing
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From (2)
can be defined as :
SSR
SST
.(*)
Where
EXERCISES
1. The director of Graduate Studies at a large college of business would like to be able to
predict the Grade Point Index (GPI) of students in an MBA program based on Graduate
Management Aptitude Test (GMAT) score. A sample of 15 students who had completed 2
years in the program is selected; the results are as follows :
Relating GPI to GMAT score
Observation
GMAT score
GPI
Observation
GMAT score
GPI
688
3.72
616
3.45
647
3.44
10
594
3.33
652
3.21
11
567
3.07
608
3.29
12
542
2.86
680
3.91
13
551
2.91
617
3.28
14
573
2.79
557
3.02
15
536
3.00
599
3.13
Xi
Yi
25
25
20
30
16
2.6
1100
3.4
1400
3.6
1800
3.2
1300
3.5
1600
2.9
1200
Selling Price
(y)
House Size
(x)
Selling Price
(y)
20.0
89.5
24.3
119.9
14.8
79.9
20.2
87.6
20.5
83.1
22.0
112.6
12.5
56.9
19.0
120.8
18.0
66.6
12.3
78.5
14.3
82.5
14.0
74.3
27.5
126.3
16.7
74.8
16.5
79.3
(y)
25
93
12
57
18
55
26
90
19
82
20
95
23
95
15
80
22
85
61
(a) Find the equation of the regression line to help predict the exam
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score on the basis of study hours.
(b) If a student study 16 hours, what is exam score?
EXAMPLES
1. Suppose the data in tabel (below) represent
the
grade point averages of 15 recent
graduates and their starting annual salaries
2/23/15
SWN/PROBABILITY AND
STATISTIC
28
GPA
Starting salary
2.95
18.5
3.20
20.0
3.40
21.1
3.60
22.4
3.20
21.2
2.85
15.0
3.10
18.0
2.85
18.8
3.05
15.7
2.70
14.4
2.75
15.5
3.10
17.2
3.15
19.0
2.95
17.2
2.75
16.8
2/23/15
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SWN/PROBABILITY AND
STATISTIC
29
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SWN/PROBABILITY AND
STATISTIC
30
GPA
SALARY
ESTIMATED
SALARY
2,95
18,5
54,575
8,7025
342,25
17,32
3,20
20,0
64,000
10,2400
400,00
19,35
3,40
21,1
71,740
11,5600
445,21
20,98
3,60
22,4
80,640
12,9600
501,76
22,60
3,20
21,2
67,840
10,2400
449,44
19,35
2,85
15,0
42,750
8,1225
225,00
16,51
3,10
18,0
55,800
9,6100
324,00
18,54
2,85
18,8
53,580
8,1225
353,44
16,51
3,05
15,7
47,885
9,3025
246,49
18,13
2,70
14,4
38,880
7,2900
207,36
15,29
2,75
15,5
42,625
7,5625
240,25
15,70
3,10
17,2
53,320
9,6100
295,84
18,54
3,15
19,0
59,850
9,9225
361,00
18,95
2,95
17,2
50,740
8,7025
295,84
17,32
2,75
16,8
46,200
7,5625
282,24
15,70
45,6
270,8
830,425
2/23/15
139,5100
4970,12
270,79
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SWN/PROBABILITY AND
STATISTIC
31
2/23/15
SWN/PROBABILITY AND
STATISTIC
32
67
68
69
73
66
70
SOLUSI
a) Buat dan kerjakan sendiri dalam sistim koordinat orthogonal.
b)
Total
s
X2
Y2
XY
68
67
4624
4489
4556
64
68
4096
4624
4352
70
69
4900
4761
4830
72
73
5184
5329
5256
69
66
4761
4356
4554
74
70
5476
4900
5180
417
413
29.041
28.459
28.728
2/23/15
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SWN/PROBABILITY AND
STATISTIC
34
c) Koefficien korrelasi r ?
2/23/15
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SWN/PROBABILITY AND
STATISTIC
35
18
26
28
34
36
42
48
52
54
60
54
64
54
62
68
70
76
66
76
74
SWN/PROBABILITY AND
STATISTIC
36
Solusi
Buat tabulasi, untuk menghitung X, Y,
, dan XY
y2 = 44680
X
X2
XY
18
57
324
972
2916
26
64
676
1664
4096
28
54
784
1512
2916
34
62
1156
2108
3844
36
68
1296
2448
4624
42
70
1764
2940
4900
48
76
2304
3648
5776
52
66
2704
3432
4356
54
76
2916
4104
5776
60
74
3600
X 398
Y 664
Dari sini
dapat
dihitung b
dan a
Y 46.52 0.4994 X
4440
5476
X 2 17524 XY 27268
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2/23/15
SWN/PROBABILITY AND
STATISTIC
37
110
15
220
20
200
College Grade
Point Average (y)
600
3.20
550
3.00
500
3.00
650
3.50
625
2.80
480
2.60
700
3.60
580
3.10
19.9
9.0
25.5
4.0
23.9
8.0
24.0
9.5
22.5
3.0
20.5
7.0
21.0
1.5
17.7
8.5
30.0
7.5
25.0
9.5
21.0
6.0
18.6
Years experience
S5alary(thousands)
5.5
19.9
9.0
25.5
4.0
23.9
8.0
24.0
9.5
22.5
3.0
20.5
7.0
21.0
1.5
17.7
8.5
30.0
7.5
25.0
9.5
21.0
6.0
18.6
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