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Chapter 7

ECO220Y1 Chapter Notes - Chapter 7: Dependent And Independent Variables, Regression Analysis, Linear ModelPremium

4 pages39 viewsSummer 2018

Department
Economics
Course Code
ECO220Y1
Professor
Victor Yu
Chapter
7

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ECO220
May 2018
1
Ch. 7: Introduction to Linear Regression
LO 7.1 The Linear Model
Linear model (line of best fit OR regression line): an equation of a straight line through the
data fit by least squares
3 basic steps of regression analysis
1. Start with some data
2. Fit a model to the data
3. Use the model to predict an estimate of something you would like to know
Explanatory variable (independent variable): the variables used to explain the value of
another variable, usually denoted by x
On the horizontal x-axis
Predicted variable (response/dependent variable): the variable whose value depends on the
value of the explanatory variable usually denoted by y
On the vertical y-axis
Residuals
Predicted value: the prediction for y found for each x-value in the data.
Found by substituting the x-value in the regression equation
Are values on the fitted line
The difference between y and the predicted value (𝑦̂) is called the residual
𝑒=𝑦𝑦̂
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