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How does a linear regression allow us to better estimate trends costs and other factors in complex situations?
You question is how linear regression improves estimates of trends. Generally trends are used to estimate future costs, but they may also be used to compare one product to another. I think first you must define what linear regression is, and what the alternative forecast methods exists. Linear regression does not necessary lead to improved estimates, but it has advantages over other estimation procesures. Linear regression is a mathematical procedure that calculates a "best fit" line through the data. It is called a best fit line because the parameters of the line will minimizes the sum of the squared errors (SSE). The error is the difference between the calculated dependent variable value (usually y values) and actual their value. One can spot data trends and simply draw a line through them, and consider this a good fit of the data. If you are interested in forecasting, there are many methods available. One can use more complex forecasting methods, including time series analysis (ARIMA methods, weighted linear regression, or multivariant regression or stochastic modeling for forecasting. The advantages to linear regression are that a) it will provide a single slope or trend, b) the fit of the data should be unbiased, c) the fit minimizes error and d) it will be consistent. If in your example, the errors from regression from fitting the cost data can be considered random deviations from the trend, then the fitted line will be unbiased. Linear regression is consistent because anyone who calculates the trend from the same dataset will have the same value. Linear regression will be precise but that does not mean that they will be accurate. I hope this answers your question. If not, perhaps you can ask an additional question with more specifics.
How do you plot linear regression line?
Linear regression looks at the relationship between two variables, X and Y. The regression line is the "best" line though some data you that you or someone else has collected. You want to find the best slope and the best y intercept to be able to plot the line that will allow you to predict Y given a value of X. This is usually done by minimizing the sum of the squares. Regression Equation is y = a + bx Slope(b) = (NΣXY - (ΣX)(ΣY)) / (NΣX2 - (ΣX)2) Intercept(a) = (ΣY - b(ΣX)) / N In the equation above: X and Y are the variables given as an ordered pair (X,Y) b = The slope of the regression line a = The intercept point of the regression line and the y axis. N = Number of values or elements X = First Score Y = Second Score ΣXY = Sum of the product of first and Second Scores ΣX = Sum of First Scores ΣY = Sum of Second Scores ΣX2 = Sum of square First Scores Once you find the slope and the intercept, you plot it the same way you plot any other line!
How do you plot regression line?
Linear regression looks at the relationship between two variables, X and Y. The regression line is the "best" line though some data you that you or someone else has collected. You want to find the best slope and the best y intercept to be able to plot the line that will allow you to predict Y given a value of X. This is usually done by minimizing the sum of the squares. Regression Equation is y = a + bx Slope(b) = (NΣXY - (ΣX)(ΣY)) / (NΣX2 - (ΣX)2) Intercept(a) = (ΣY - b(ΣX)) / N In the equation above: X and Y are the variables given as an ordered pair (X,Y) b = The slope of the regression line a = The intercept point of the regression line and the y axis. N = Number of values or elements X = First Score Y = Second Score ΣXY = Sum of the product of first and Second Scores ΣX = Sum of First Scores ΣY = Sum of Second Scores ΣX2 = Sum of square First Scores Once you find the slope and the intercept, you plot it the same way you plot any other line!
What is residual in linear regression model?
You have a set of data points (x1,y1), (x2,y2), ..., (xn,yn), and you have assumed a line model, y = mx + b + e, where e is random error.You have fit the regression model to obtain estimates of the slope, m, and the intercept, b. Let me call them m and b.Now you can calculate yi - mxi - b for i = 1, 2, ... n. Notice that, for each i, this is an estimate of the error in yi. It's called the residual because it's what's 'left over' in yi after removing the part 'explained' by the regression.Another way of understanding this is to take a set of linearly related (x,y) pairs, graph them, calculate the regression line, plot it on the same graph and then measure the verticaldistances between the regression line and the each of the pairs. Those vertical distances are the residuals.
A trend line on a graph is always the same as the line of best fit?
No.
