Statistical Prediction

🤖Statistical Prediction Unit 2 – Regression: Linear and Polynomial Models

Regression analysis is a powerful statistical tool for predicting relationships between variables. It helps us understand how changes in independent variables affect a dependent variable, making it useful for forecasting and identifying cause-and-effect relationships in various fields. Linear and polynomial regression models are key techniques in this area. They allow us to fit lines or curves to data, estimate coefficients, and evaluate model performance. Understanding these models and their applications is crucial for making accurate predictions and informed decisions based on data.

What's This All About?

  • Regression analysis predicts the relationship between a dependent variable and one or more independent variables
  • Helps understand how the value of the dependent variable changes when any one of the independent variables is varied, while the other independent variables are held fixed
  • Commonly used for forecasting and finding cause and effect relationships between variables
  • Regression models can be used for prediction, inference, hypothesis testing, and modeling of causal relationships
  • Dependent variable is the main factor you're trying to understand or predict
  • Independent variables are the factors you suspect have an impact on your dependent variable
  • Regression analysis helps you understand which factors matter most, which factors can be ignored, and how these factors influence each other

Key Concepts and Definitions

  • Regression coefficient measures the strength of the relationship between a dependent variable and an independent variable
  • Intercept is the expected mean value of the dependent variable when all independent variables are equal to zero
  • Residuals are the differences between the observed values of the dependent variable and the predicted values
  • R-squared (R2R^2) is a statistical measure of how close the data are to the fitted regression line
    • It's also known as the coefficient of determination
    • R2R^2 values range from 0 to 1, with higher values indicating a better fit
  • Adjusted R-squared adjusts the R2R^2 based on the number of independent variables in the model
  • P-value is used to determine the statistical significance of the regression coefficients
    • A low p-value (typically ≤ 0.05) indicates that the relationship between the variables is statistically significant

Types of Regression Models

  • Simple linear regression involves only one independent variable
    • Relationship between the dependent variable and independent variable is assumed to be linear
    • Equation: y=β0+β1x+ϵy = \beta_0 + \beta_1x + \epsilon, where yy is the dependent variable, xx is the independent variable, β0\beta_0 is the intercept, β1\beta_1 is the slope, and ϵ\epsilon is the error term
  • Multiple linear regression involves two or more independent variables
    • Equation: y=β0+β1x1+β2x2+...+βnxn+ϵy = \beta_0 + \beta_1x_1 + \beta_2x_2 + ... + \beta_nx_n + \epsilon, where yy is the dependent variable, x1,x2,...,xnx_1, x_2, ..., x_n are the independent variables, β0\beta_0 is the intercept, β1,β2,...,βn\beta_1, \beta_2, ..., \beta_n are the slopes, and ϵ\epsilon is the error term
  • Polynomial regression models the relationship between the dependent variable and independent variables as an nth degree polynomial
    • Useful when the relationship between the variables is curvilinear
  • Stepwise regression is a method of fitting regression models in which the choice of predictive variables is carried out by an automatic procedure (forward selection, backward elimination, or bidirectional elimination)
  • Ridge regression is a technique for analyzing multiple regression data that suffer from multicollinearity, which occurs when independent variables in a regression model are correlated

Building Linear Regression Models

  • Collect data on the dependent variable and independent variable(s)
  • Create a scatter plot to visually inspect the relationship between the variables
  • Use the least squares method to estimate the regression coefficients
    • Least squares method minimizes the sum of the squared residuals
  • Assess the model's goodness of fit using measures like R2R^2 and adjusted R2R^2
  • Test the statistical significance of the regression coefficients using t-tests or F-tests
  • Validate the assumptions of linear regression (linearity, homoscedasticity, independence, and normality)
    • Linearity assumes a linear relationship between the dependent variable and independent variable(s)
    • Homoscedasticity assumes constant variance of the residuals across all levels of the independent variable(s)
    • Independence assumes that the residuals are not correlated with each other
    • Normality assumes that the residuals are normally distributed

Polynomial Regression: When Lines Aren't Enough

  • Polynomial regression is used when the relationship between the dependent variable and independent variable is not linear
  • Polynomial regression equation: y=β0+β1x+β2x2+...+βnxn+ϵy = \beta_0 + \beta_1x + \beta_2x^2 + ... + \beta_nx^n + \epsilon, where yy is the dependent variable, xx is the independent variable, β0\beta_0 is the intercept, β1,β2,...,βn\beta_1, \beta_2, ..., \beta_n are the coefficients, and ϵ\epsilon is the error term
  • The degree of the polynomial (n) determines the number of bends in the fitted line
    • A second-degree polynomial (quadratic) has one bend
    • A third-degree polynomial (cubic) has two bends
  • Higher degree polynomials can fit more complex relationships but are also more prone to overfitting
  • Polynomial features can be created from the original independent variable(s) using techniques like feature engineering

Model Evaluation and Selection

  • Split the data into training and testing sets to evaluate the model's performance on unseen data
  • Use cross-validation techniques (k-fold, leave-one-out) to assess the model's performance and stability
  • Compare the performance of different models using metrics like mean squared error (MSE), root mean squared error (RMSE), and mean absolute error (MAE)
    • MSE is the average of the squared differences between the predicted and actual values
    • RMSE is the square root of the MSE and provides an interpretable measure of the model's accuracy
    • MAE is the average of the absolute differences between the predicted and actual values
  • Use the Akaike Information Criterion (AIC) or Bayesian Information Criterion (BIC) to compare models with different numbers of parameters
    • AIC and BIC balance the model's goodness of fit with its complexity, favoring simpler models
  • Select the model that performs best on the testing set and has the lowest complexity

Real-World Applications

  • Predicting house prices based on features like square footage, number of bedrooms, and location
  • Forecasting sales based on advertising expenditure, promotions, and economic indicators
  • Analyzing the relationship between a patient's characteristics (age, weight, blood pressure) and the likelihood of developing a disease
  • Predicting stock prices based on historical data, market trends, and company performance
  • Estimating the impact of various factors (education, experience, industry) on an individual's salary

Common Pitfalls and How to Avoid Them

  • Overfitting occurs when a model is too complex and fits the noise in the data rather than the underlying pattern
    • Regularization techniques (L1 and L2) can help prevent overfitting by adding a penalty term to the loss function
    • Use cross-validation to detect overfitting and select the appropriate model complexity
  • Multicollinearity occurs when independent variables are highly correlated with each other
    • Multicollinearity can lead to unstable and unreliable estimates of the regression coefficients
    • Use correlation matrices and variance inflation factors (VIF) to detect multicollinearity
    • Consider removing one of the correlated variables or using dimensionality reduction techniques (PCA)
  • Outliers can have a significant impact on the regression results
    • Identify outliers using scatter plots, residual plots, and Cook's distance
    • Consider removing outliers if they are due to measurement errors or data entry mistakes
    • Use robust regression techniques (M-estimators, RANSAC) that are less sensitive to outliers
  • Non-normality of residuals can invalidate the assumptions of hypothesis tests and confidence intervals
    • Use residual plots and normality tests (Shapiro-Wilk, Kolmogorov-Smirnov) to check for non-normality
    • Consider transforming the dependent variable or using generalized linear models (GLMs) if the residuals are not normally distributed


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© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.