5 - Interpreting OLS Regression
from PART 1 - DESCRIPTION
Published online by Cambridge University Press: 05 June 2012
Summary
When Mid-Parents are taller than mediocrity, their Children tend to be shorter than they. When Mid-Parents are shorter than mediocrity, their Children tend to be taller than they.
Francis GaltonIntroduction
In the previous chapter, we introduced the OLS regression line. This chapter is about interpreting regression in several different senses of the word. Section 5.2 interprets what regression does by exploring the way in which it compresses information about a scatter diagram. We then go on to compare the regression line to the SD line. Another interpretation, in Section 5.3, takes advantage of regression's historical roots. We show how regression was first used and point out that there are in fact two regression lines for summarizing the relationship between two variables. Section 5.4 examines regression from another angle, interpreting the regression slope as a weighted sum of the Y values. This will make clear that regression coefficients are closely related to the sum (and average). Next, Sections 5.5 and 5.6, demonstrate how to interpret the output from a regression, including the residuals and two new statistics called the RMSE and R2. We show how regression output can be used to reveal important characteristics about the underlying data. Finally, Section 5.7, examines some of the limitations of regression analysis as a descriptive tool. Regression is not always appropriate and may mislead the reader.
Regression as Double Compression
Workbooks: Double Compression.xls; East North Central FT Workers.xls
Regression answers a question about the relationship and movement between variables. Given a value of X, the regression line predicts Y.
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- Information
- Introductory EconometricsUsing Monte Carlo Simulation with Microsoft Excel, pp. 95 - 137Publisher: Cambridge University PressPrint publication year: 2005