Concept:

1. Understand regression analysis and types of regression models.

2. Know and build a simple linear regression model.
3. Understand and develop a logistic regression model.
4. Learn cluster analysis, types and methods to form clusters.
5. Know time series and its components.
6. Decompose seasonal and non-seasonal time series.
7. Understand different exponential smoothing methods.
8. Know the advantage and disadvantage of exponential smoothing.
9. Understand the concept of white noise and correlogram.
10. Apply different time series analysis like Box Jenkins, AR, MA, ARMA etc.
11. Understand all the analysis techniques with case studies.

Regression Analysis:

 Regression analysis mainly focus on finding a relationship between dependent variable

and one or more independent variables.
 Predict the values of dependent variable based on one or more independent variables.
 Coefficient explain the impact of changes in an independent variable on dependent
variable.
Y = F (X, β)
Where Y is the dependent variable
X is the independent variable
Β is the unknown coefficient
 Widely used in prediction and forecasting.

Types Of regression Models:

Regression
Models

Univariate Multivariate

Linear Non Linear

Linear NON
Linear

Simple Multiple
Simple Linear regression:

 It’s a common technique to determine how one variable of interest is affected by another.
 Its is used for three main purpose:
o For describing the linear dependent of one variable on the other.
o For prediction of values of other variable from the one which has more data.
o Correction of linear dependent on one variable on the other.
 A line is fitted through the group of plotted data.
 The distance if the plotted points from the line gives the residual value.
 The residual values is a discrepancy between the actual and the predicted value.
 The predicted to find the best fit is called the least – Square method.

Linear regression Model:

 The equation that represents how an independent variable is related to depended variable and
an error term is regression model.
Y = βo + β1 + €
o Where, βo and β1are called parameters of the model,
€ is a random variable called error term.
 Getting the estimates of βo and β1, ie E(Y|Y) means finding the best straight line that can be
drawn through the scatter plot Y vs X. This is done by Least square (LS) estimates.

Simple Linear regression – Graphical understanding.

Y Axis An observed value of x when x equals xo

Error Term

Straight Line
Defined by the
Equation
β1 Y = βo + β1 + €

βo

Mean value of y when x equals X0

y intercept
 X Aixs

Process to build a regression model:

Linear regression model assumptions

 The preditor variable x is non -random.
 The error term € is random
 Error term follow normal distribution.
 Standard deviation of error is independent of x.
 The data being used to estimate the parmater should be independent of
each other.
 If any of the above asumptions are violated, modelling procedure must be
modified.
Coefficient of determination R2
A measure of goodness of fit - How well your model does fit the data?

R2 = 0, no Liner relationship
 R2 = 0, negative Liner relationship

R2 = +1, Positive Liner relationship

How good is the model?

 Based on R2 value, we can explain how well the model explain the data the percentage of
differences that are explained by this model.
 The differences between observation that are not explained by the model is the error term or
residual.
 Suppose we have a case in which R2 value is 0.74. This means that 74% of variance in the values
of the dependent variable is explained by the model and the remaining 26% which is not
explained is its residual or error term.