CPT Section D Quantitative Aptitude Chapter12

CA.Dharmendra Gupta
Regression is the measure of
average relationship between
two or more variables in terms
of original units of the data
Regression analysis is a statistical tool
to study the nature and extent of
functional relationship between two or
more variables and to estimate the
unknown values of dependent variable.
The Variable Which is predicted
on the basis of another variable
is called Dependent variable or
explained variable
Dependent
variable :
:The Variable Which is used to
predict another variable is called
independent variable or
explanatory variable
Independent
variable
1.Regression line facilitates to predict the
values of a dependent variable from the given
value of independent variable.
2.Through Standard Error facilitates to obtain
a measure of the error involved in using the
regression line as basis for estimation.
3.Regression coefficients (bxy and byx)
facilitates to calculate coefficient of
determination (r2) and coefficient of correlation.
4.Regression Analysis is highly useful tool in
economics and business.
Correlation Regression
1. Correlation measures degree and
direction of relationship between
variables.
1. Regression measures nature and
extent of average relationship
between two or more variables.
2.It is a relative measure showing
association between variables.
2.It is an absolute measure
relationship.
Correlation Regression
3. Correlation Coefficient is
independent of both origin and
scale.
3. Regression Coefficient is independent of
origin but not scale.

4. Correlation Coefficient is
independent of units of
measurement.
4.Regression Coefficient is not
independent of units of measurement.

5.Correlation Coefficient is
lies between -1 and +1.
5. Regression equation may be linear or
non-linear .
6. It is not forecasting device. 6.It is a forecasting device.
Regression line X on Y



Where X = Dependent Variable
Y = Independent variable
a = intercept and
b = slope



There are two regression coefficients byx and
bxy
The regression coefficient Y on X is


The regression coefficient X on Y is
y
x
xy
. r b

=
The regression coefficient X on Y is
Regression line Y on X


Where Y = Dependent Variable
X = Independent variable
a = intercept and
b = slope


Two Regression Equations.
Product of regression coefficient.
Signs of Regression Coefficient and correlation coefficient.
Intersection of means.
Slopes .
Value of r Angle between Regression
Lines
a) If r=0


b) If r=+1 or -1
Regression lines are
perpendicular to each other.

Regression lines are coincide
to become identical .
1.Same Sign.
2.Both cannot greater than one .
3.Independent of origin but not of scale .
4.Arithmetic mean of regression coefficients are greater than Correlation
coefficient.
5.r,bxy and byx have same sign.
6 .Correlation coefficient is the Geometric Mean (GM) b/w regression
coefficients.
This property states that if the original pairs of
variables is (x,y) and if they are changed to the pair
(u,v), where x=a + p u and y=c +q v
or
Regression line Y on X


The two normal Equations are




Regression line X on Y


The two normal Equations are




Y
i
=
+ +

Relationship between variables is described by a
linear function
The change of the independent variable causes
the change in the dependent variable
Dependent
(Response)
Variable
Independent
(Explanatory)
Variable
Slope
Y-Intercept
Random Error
a
bx
Using Ordinary Least Squares (OLS), we
can find the values of a and b that minimize
the sum of the squared residuals:






X
Advertisement Exp.
(Rs. lakhs)
1 2 3 4 5
Y
Sales
(Rs. lakhs)
10 20 30 40 50
Find out Two Regression Equations
Calculate coefficient of correlation
Estimate the likely sales when advertising
expenditure is Rs.7 lakhs
What should be the advertising expenditure if the
firm wants to attain sales target of Rs.80 lakhs
Regression Equation of X on Y :
X c=a + b Y
Then the normal Equations are


Substituting the values in the above equations:
15=5a+150b
550=150a+5500b

1
2
Regression Equation of Y on X :
Yc = a + bX
Then the normal Equations are


Substituting the values in the above equations:
150=5a+15b
550=15a+55b

1
2
Regression line X on Y
Xc=0.10Y

Regression line Yon X


Correlation coefficient r=1.0


c) Sales (Y) when the advertising 7 Expenditure
(X) is Rs.7lakhs
Y=10x=10*7=70
d) Advertising Expenditure (X) to attain sales (Y)
target of 80lakhs.
X=0.1Y=0.1*80=8.0
SST = SSR + SSE
Total Sample
Variability
=
Explained
Variability
+
Unexplained
Variability
SST = Total Sum of Squares
Measures the variation of the Yi values around their
mean Y
SSR = Regression Sum of Squares
Explained variation attributable to the relationship
between X and Y
SSE = Error Sum of Squares
Variation attributable to factors other than the
relationship between X and Y
The coefficient of determination is the square of
the coefficient of correlation. It is equal to r
2
.
The maximum value of r
2
is unity and in the case
of all the variation in Y is explained by the
variation in X, it is defined as
Coefficient of determination( r
2
)



Coefficient of non-determination(k
2
)=1-r
2

In a partially destroyed record the following data
are available :
Variance of x =25,
Regression equation of X on Y : 5X-Y=22
Regression equation of Y on X
64X-45Y=24
Find
a) Mean values of X and Y ;
b) Coefficient of correlation between x and Y
c) Standard deviation of Y
A) the mean values of X and Y lie on the
regression lines and are obtained by solving the
given regression equations.




Multiplying (1) by 45 ,we get
1
2
3
Subtracting (2) from (3)



Putting in (1), we get:

B) the regression equation y on x is :
64x-45y=24
Again regression equation x on y is 5x-y=22





+ve sign with r is taken as both the regression
coefficients bxy and byx are positive
Now it is given that

If the relationship between x and u is u+3x=10
between two other variables y and v is 2y+5v=25
,and the regression coefficient of y on x is known
as 0.80,what would be the regression coefficient v
on u ?
Given u+3x=10
u=10-3x
p = -3
2y+5v=25
5v = 25 -2y
v = 5 0.4 y
q = - 0.40



buv=( 3/0.40)0.8 =6

MCQs
(a) independent of both change of scale and origin
(b) independent of the change of scale and not of origin
(c)independent of the change of origin and not of scale
(d) neither independent of change of scale nor of origin
Answer:c
(a) the changes in y corresponding to a unit change in x
(b) the changes in x corresponding to a unit change in y
(c) the changes in xy
(d) the changes in yx
Answer:b

(a) r
2
= 1


(b) r
2
=


( c) both
(d) none of these
Answer: c
(a) least squares
(b) concurrent deviation
(c) product moment
(d) normal equation
Answer: a
(a) r=1
(b) r =1
(c) r=0
(d) (a) or (b)
Answer:d
(a)Karl Pearson
(b)A. L. Bowley
(c)R. A. Fisher
(d) Sir Francis Galton
Answer:d
(a) +1
(b) 1
(c) 0
(d) none of these
Answer: c
X=50; Y=30; XY=1000;
X
2
=3000; Y
2
=180;n=12,the value of byx will be
(a) 0.6132
(b)1.3636
(C) 0.3090
(d) none of these
Answer:d
A)1
B)2
C) Any number
D)3
Answer:B
A) 1
B) +1
C) -1
D) none of these
E) Answer:a
A)2
B)-1
C)1
D)0
Answer:D
A)+1
B)-1
C)0
D)3
Answer:C
A) Zero
B)+1
C) -1
D) none of these
Answer:A
A)+1.25
B)-1.25
C)+1.26
D)-1.24
Answer:(A)
A) Correlation
B) Regression
C) Both
D) None
Answer:B
16. Equations of two lines of regression are
4x+3y+7 = 0 and 3x+ 4y + 8 = 0, the mean of x
and y are
a) 5/7 and 6/7
b) 4/7 and 11/7
c) 2 and 4 c
d) None of these
Answer:B

17. Two lines of regression are given by 5x+7y
22=0 and 6x+2y22=0. If the variance of y is 15,
find the standard deviation of x?
A) 2
B)
C)
D) None of these
a) 2,1
b) 2,2
c) 1,2
d) 1,1
Answer:A
A) True
B) False
C) Both
D) None of these
Answer:a
The two regression lines obtained from certain data
were y = x + 5 and 16x = 9y 94.
Find the variance of x if variance of y is 16.
A) 4/16
B) 9
C) 1
D) 5/16
Answee;B
21. For a mn two way or bivariate frequency table,
the maximum number of marginal distributions is .
A) m
B) n
C) m +n
D) 2
Answer:D