EXPERIMENT-8

Objective: Multiple Regression Model. Experiment: A consumer electronics company has adopted a regressive policy to increase sales
of a newly launched product. The company has invested in advertisement as well as employee salesman for increasing sales rapidly. Table represents the sales, no. of employed salesman and advertisement expenditure for 24 randomly selected months. Develop a regression model to predict the impact of employed salesman and advertisement expenditure on sales.
Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sales (in Rs. 000) 5000 5200 5700 6300 6000 6400 6100 6400 6900 7300 6950 7350 6920 8450 9600 10900 10200 12200 10500 12800 12600 11500 13800 14000 Salesman Employed 25 35 15 27 20 11 8 11 29 31 6 10 14 8 18 7 9 10 6 8 12 14 11 9 Advertisement Exp. (in Rs. 000) 180 250 150 240 185 160 177 315 170 240 184 218 216 246 229 269 244 305 303 320 322 460 430 422

Theory:
Linear Regression: Linear regression is an approach to modeling the relationship between a scalar variable Y and one or more explanatory variables denoted X. The case of one explanatory variable is called simple regression. More than one explanatory variable is multiple regression. Multiple Linear Regression: Multiple linear regression (MLR) is a method used to model the linear relationship between a dependent variable and more than one independent variables. The dependent variable is sometimes also called the predictand, and the independent variables the predictors. MLR is based on least squares: the model is fit such that the sum-of-squares of differences of observed and predicted values is minimized. Multiple Regression Equation: The model expresses the value of a predictand variable
as a linear function of one or more predictor variables and an error term Where a is the y intercept of the line and bi are the slopes of the predictors. In the present ques: a is the amount of sales when advertisement expenditure as well as No. of Salesman Employed is Zero and b are the slope which indicates expected change in the value of sales for per unit of additional advertisement expenditure and additional employment of Salesman.

The straight line regression model with respect to population parameters 0 , 1 and 2 can be given as: Where 0 is the population y intercept which represents the average value of the dependent variable when x1=0 and x2=0 and 1 and 2 the slope of the regression line which indicates expected change in the value of y for per unit change in the value of x1 and x2 respectively. Coefficient of Determination (R2): It is a very commonly used measure of fit for
regression models. In a regression model, the coefficient of determination measures the proportion of variation in dependent variable (y) that can be attributed or explained by the independent variable (xi) or predictors. The values of coefficient of determination ranges from 0 to 1. It is a measure that allows us to determine how certain one can be in making predictions from a certain model/graph. The coefficient of determination is the ratio of the explained variation to the total variation. It represents the percent of the data that is the closest to the line of best fit.

 Statistics test (t-test) for the slope of the regression equation line:
H0 = 1 = 0 (Advertisement Exp. is not useful for predicting the sales) H1 = 1 0 (Advertisement Exp. is useful in predicting the sales) H0 = 2 = 0 (No. of Salesman Employed is not useful for predicting the sales) H1 = 2 0 (No. of Salesman Employed is useful in predicting the sales)

Statistic testing for overall model of regression: F-statistics for overall model testing.

Where yi is observed value of dependent variable is the predicted value of dependent variable

K = No. of independent variables N = No. of observations.