Regression and Correlation 01112010 Econometrics Simple linear regression

Regression and Correlation 01/11/2010

Econometrics • Simple linear regression • Simple ; means that we concerned with only one independent and one dependent variable. • Linear; means that the power of parameters is one. • Regression , means the phenomena in which one variable depend on one or more independent variable.

Econometrics • The word regression means “backward Movement”. Regression analysis is statistical techniques used for investigation the relationship between variables. The term regression first used by sir Francis Galton (1812 -1911) from England, who was studying the relationship between height of children and height of parents.

• Today the word regression is used in quiet different sense. It investigate the dependence of one variable called dependent variable on one or more independent variable and provide us an equation to be used for estimating or predicating the average value of dependent variable for the known value of the independent variable

Econometrics • Dependent variable ---- random variable • Independent variable --- fixed value • The relation between the expected value of the dependent variable and the independent variable is called a regression. • Dependent variable, predicted, response , endogenous, explained variable • Independent variable, non-random, regressor, predictor, explanatory variable

Econometrics • Simple linear regression model