ECON 6306 Lecture Notes - Lecture 13: Logistic Regression

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pearjellyfish746

13 May 2018

School

UT-Dallas

Department

Economics

Course

ECON 6306

Professor

Dr. Michael Tiefelsdorf

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Predicting categorical variables

We have tried to model y variables that were continuous, like income or sales. What if we had a discrete

y variable such as whether a person defaulted on a loan or not.

We will start with the case of a binary y variable such as the default status of a person. The technique

used to model it is called logistic regression.

Logistic Regression

There are a couple of problems when we try to model a binary variable with a linear regression model.

The first problem is that we can predict values greater or smaller than 1, even though our target variable

is either 0 or 1.

The second problem is that if we have, say too many 0s and too few 1s, our slope might be such that we

do’t ed up predictig s at all.

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Document Summary

We have tried to model y variables that were continuous, like income or sales. What if we had a discrete y variable such as whether a person defaulted on a loan or not. We will start with the case of a binary y variable such as the default status of a person. The technique used to model it is called logistic regression. There are a couple of problems when we try to model a binary variable with a linear regression model. The first problem is that we can predict values greater or smaller than 1, even though our target variable is either 0 or 1. The second problem is that if we have, say too many 0s and too few 1s, our slope might be such that we do(cid:374)"t e(cid:374)d up predicti(cid:374)g (cid:1005)s at all. We fix it by using a different technique called logistic regression. It does not reduce the sum of errors.

Related Questions

Question 1

Which of the following approaches to understanding and predicting consumer behavior depends primarily on the knowledge and experience of a firm's employees and its suppliers?

		Test marketing and price experiments
		Analysis of historical data.
		Direct consumer surveys.
		Expert opinion.

Question 2

In which of the following situations would reliance on expert opinion as a basis for a managerial decision be most preferred?

		When the product being marketed is relatively new.
		When the level of economic activity can have a significant effect on the demand for the firm's output.
		When the product can be packaged with a variety of price and quality combinations.
		When the business in question serves as a supplier of inputs to other businesses, especially in multi-product situations where other strategies may be prohibitively expensive.

Question 3

The approach to analyzing consumer behavior that asks consumers to rank and choose among different product attributes to reveal their relative valuation of different characteristics is called:

		conjoint analysis.
		contingent valuation.
		the hedonic estimation technique.
		a direct consumer survey.

Question 4

All of the following are limitations of direct consumer surveys except:

		the possibility of response biases because survey respondents may not want to reveal their true preferences.
		the possibility that the type of questions asked may unintentionally bias the respondent's answers.
		the likelihood that respondents will deliberately and systematically mislead interviewers.
		the possibility that consumers' responses may not reflect their actual behavior in the market place.

Question 5

Which of the following approaches to understanding and predicting consumer behavior does not actually solicit any information from potential customers?

		Expert opinion.
		Test marketing.
		Analysis of historical data.
		Conjoint analysis.

Question 6

Data collected on a sample of individuals with different characteristics at a specific point in time are called:

		panel data.
		cross-section data.
		time series data.
		none of the above.

Question 7

Which of the following approaches to understanding and predicting consumer behavior provides the most insight into how consumers can be expected to respond in an actual market setting?

		Test marketing.
		Conjoint analysis.
		Expert opinion.
		Analysis of historical data.

Question 8

An approach to analyzing consumer behavior in which consumer reaction to different prices is analyzed in a laboratory situation or a test market is called:

		non-price experiments.
		focus groups.
		price experiments.
		none of the above.

Question 9

Data collected on the same observation unit at a number of points in time are called:

		panel data.
		time series data.
		cross-section data.
		none of the above.

Question 10

A measure of how much the coefficient would vary in regressions based on different samples is called:

		F-statistic.
		standard error of the estimated coefficient.
		t-statistic.
		partial F-statistic.

Question 11

The test statistic used to test the hypothesis of whether a regression coefficient is significantly different from zero, holding all other independent variables constant, is called a(n):

		t-test.
		F-test.
		multicollinearity test.
		autocorrelation test.

Question 12

Regression analysis that analyzes the relationship between one dependent variable and several independent variables is called:

		cluster analysis.
		correlation analysis.
		multiple regression analysis.
		simple regression analysis.

Question 13

The ratio of the regression coefficient to its standard error is called:

		F-statistic.
		t-statistic.
		coefficient of determination.
		partial F-statistic.

Question 14

The coefficient of determination will range between what values?

		-1 and +1
		0 and 1
		-3 and +3
		none of the above

Question 15

The range of values in which we can be confident that the true regression coefficient lies within a given degree of probability is called a:

		confidence interval.
		logistic regression.
		prediction interval.
		none of the above.

Question 16

The estimated regression equation is Y = 10 + 2.5X, if X =0 than the predicted value of Y is equal to

		2.5
		7.5
		12.5
		10

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ECON 6306 Lecture Notes - Lecture 13: Logistic Regression

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