🤖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.
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 (R2) is a statistical measure of how close the data are to the fitted regression line
It's also known as the coefficient of determination
R2 values range from 0 to 1, with higher values indicating a better fit
Adjusted R-squared adjusts the R2 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+ϵ, where y is the dependent variable, x is the independent variable, β0 is the intercept, β1 is the slope, and ϵ is the error term
Multiple linear regression involves two or more independent variables
Equation: y=β0+β1x1+β2x2+...+βnxn+ϵ, where y is the dependent variable, x1,x2,...,xn are the independent variables, β0 is the intercept, β1,β2,...,βn are the slopes, and ϵ 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 R2 and adjusted R2
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+ϵ, where y is the dependent variable, x is the independent variable, β0 is the intercept, β1,β2,...,βn are the coefficients, and ϵ 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