Regression Tutorial 201 With NumXL

Tutorial:
Regression 201
Thisisthethirdentryinourregressionanalysisandmodelingseries.Inthistutorial,wecontinuethe analysisdiscussionwestartedearlierbyleveragingamoreadvancedtechniqueinfluentialdata analysistohelpusimprovethemodel,and,asaresult,thereliabilityoftheforecast. Again,wewilluseasampledatasetgatheredfrom20differentsalespersons.Theregressionmodel attemptstoexplainandpredicttheweeklysalesforeachperson(dependentvariable)usingtwo explanatoryvariables:intelligence(IQ)andextroversion.
Data Preparation
Similartowhatwedidinourearliertutorial,weorganizeoursampledatabyplacingthevalueofeach variableinaseparatecolumnandeachobservationinaseparaterow. Next,weintroducethemask.ThemaskisaBooleanarray(0,1)thatchooseswhichvariableis included(orexcluded)intheanalysis. Initially,atthetopofthetable,letsinsertthemaskcellsarray;eachwithavalueof1(i.e.included). Thearrayisshownbelowhighlightedbelow:
Inthisexample,wehave20observationsandtwoindependent(explanatory)variables.Theresponseor dependentvariableistheweeklysales.
Process
Nowwearereadytoconductourregressionanalysis.First,selectanemptycellinyourworksheet whereyouwishtheoutputtobegenerated,thenlocateandclickontheregressioniconintheNumXL
Regression201Tutorial
SpiderFinancialCorp,2013
tab(ortoolbar).
NowtheRegressionWizardwillappear.
Selectthecellsrangefortheresponse/dependentvariablevalues(i.e.weeklysales).Selectthecells rangefortheexplanatory(independent)variablesvalues.ForVariables(X)Mask,selectthecellsatthe topofthedatatable(Booleanarray). Notes: 1. Thecellsrangeincludes(optional)theheading(Label)cell,whichwouldbeusedintheoutput tableswhereitreferencesthosevariables. 2. Theexplanatoryvariables(i.e.X)arealreadygroupedbycolumns(eachcolumnrepresentsa variable),sowedontneedtochangethat. 3. Bydefault,theoutputcellsrangeissettothecurrentselectedcellinyourworksheet. Pleasenotethat,onceweselecttheXandYcellsrange,theoptions,ForecastandMissingValues tabsbecomeavailable(enabled). Next,selecttheOptionstab.
Initially,thetabissettothefollowingvalues: Theregressionintercept/constantisleftblank.Thisindicatesthattheregressioninterceptwill beestimatedbytheregression.Tosettheregressiontoafixedvalue(e.g.zero(0)),enterit there. Thesignificancelevel(aka. )issetto5% Inoutputsection,themostcommonregressionanalysisisselected. Forautomodeling,checkthisoption.
Now,clicktheMissingValuestab.
Inthistab,youcanselectanapproachtohandlemissingvaluesinthedataset(XandY).Bydefault,any missingvaluefoundinXorinYinanyobservationwouldexcludetheobservationfromtheanalysis. Thistreatmentisagoodapproachforouranalysis,soletsleaveitunchanged. Now,clickOKtogeneratetheoutputtables.
Toassesstheinfluencethateachobservationexertsonourmodel,wecalculateacoupleofstatistical measures:leverageandCooksdistance.
Selectthecellnexttotheresponsevariable. Intheformulabar,typeintheMLR_FITTEDfunction,thenclickthefxbutton.
TheFunctionWizardpopsup.Selecttheinputcellsrange,mask,andaReturntypeof4forthe leveragestatistics.ClickOK.
MLR_FITTEDreturnsanarrayofvalues,butyouwillinitiallyonlyseethe1stvalue. Todisplaythefullarray,selectallthecellsbelow(totheendofthesample).PressF2,thenpress CTRL+SHIFT+ENTERtocopythearrayformula.
Now,tocalculatetheCooksdistance,selectthecellnexttoLeverageandrepeatthesame steps,butwiththereturntype=5.
Analysis
NowthatwehavetheleverageandCooksdistancestatistics,letsinterprettheirfindings. Regression201Tutorial 6 SpiderFinancialCorp,2013
1. Leverage Statistics (H)

Leveragestatisticsmeasure thedistanceofan observationfromthecenter ofthedata.Inourexample, theintelligenceand extroversionvaluesfor Salesman11arefurthest fromtheaverage.Doesthis meanSalesman11isan outlier?Doesthismeanhe exertsinfluenceonthe calculationoftheregression coefficient?
40% 35% 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Leverage(H)
Toexaminethisassumption,letsremoveSalesman11fromourinputdataandexaminetheresulting regression.Todoso,justinsertan#N/Avalueinanyinputvariableofthisobservation.
(Fulldataset) Omittingsalesman#11
Droppingobservation11madethingsatbestthesameasearlier.Weoptedtorecoverthisobservation backintothesample. Insum,theleveragestatisticsdo notnecessarilyimplyanoutlier, butmerelyadistantobservation withfewneighbors.
70%
Cook'sDistance(D)
60%
2. Cooks Distance (D)

TheCooksdistancecorrectsfor weaknessintheleverage statistics,andisthusmore Regression201Tutorial
50%
40%
30%
20%
7
10%
0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
indicativeofinfluentialdata.Furthermore,therearefewheuristicsforthethresholdvaluesofCooks distancetodetectaninfluentialdatum.Forouranalysis,weoftenuse translatesto20%forthe20observationsinourdataset). Usingthethresholdorjustlookingattheearlierplot,wedetectthatSalesman16exertsthehighest influenceonourregression,soletsvoidthisobservation(bysetting#N/Ainoneoftheinputvariables).
4 asathreshold(which N
NotethattheleveragestatisticsandCooksdistancereturn#N/Aforthismissingvalue. Letsnowexaminetheregressionstatisticsbeforeandafterwedroppedthesixteenthobservation.
(FullDataset)
(WithoutSalesman#16)
Asyoumayalreadyhavenoticed,theregressionimprovedsignificantlyoneverydimension(e.g.R square,stderror,etc.).Salesman#16seemstobeaninfluentialoutlier,sowelldrophim. Regression201Tutorial 8 SpiderFinancialCorp,2013
Tohelpexplainwhatmakesanobservationinfluential,letsexaminetheextroversionvs.weeklysales graphbelow:
Wedrawthelineartrendasaproxyforourregressionmodel.Theblack(circle)datapointrepresents Salesman16.Itslocation(extroversionandweeklysalesvalue)ispullingtheregression(dashed)line towardit,affectingthevalueoftheregressionslopeandintercept. Droppingthisobservationreleasestheregressionline,adjustingittobetterfittheremainingpoints. LetstakeanotherlookattheCooksdistanceplot(withoutSalesman16,andwithathresholdof
4 21% ) 19
TheCooksdistancevaluesforthedifferentplotsaredistributedsomewhatuniformly,andwemaystop there. Note:Bearinmindthatourthresholdruleismerelyaheuristic(ruleofthumb),andshouldnotbetaken rigidly,butratherasaguideline.
Conclusion
Inthistutorial,wehaveshownthatexcludingobservation#16isbeneficialtoourmodelingeffortsasit exertsignificantinfluenceonourcoefficientcalculation. Next,usingtheremaining19observations,letsrecalculate(SHIFT+F9)theregressionstatistics,ANOVA, residualsdiagnosis,stepwiseregression,etc.
10
Theoptimalsetoftheinputvariablesisthesameasearlier.Letsdroptheintelligencevariable(by settingitsvalueto0inthemask),andrecalculate
Theregressionerroris$307(vs.$332beforeweremovedsalesman#16).
11

$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
TheFinalquestionwemayaskourselves;Istheregressionstableoverthesampledataset?Nextissue.
12

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Inthistab,youcanselectanapproachtohandlemissingvaluesinthedataset(XandY).Bydefault,any missingvaluefoundinXorinYinanyobservationwouldexcludetheobservationfromtheanalysis. Thistreatmentisagoodapproachforouranalysis,soletsleaveitunchanged. Now,clickOKtogeneratetheoutputtables.

MLR_FITTEDreturnsanarrayofvalues,butyouwillinitiallyonlyseethe1stvalue. Todisplaythefullarray,selectallthecellsbelow(totheendofthesample).PressF2,thenpress CTRL+SHIFT+ENTERtocopythearrayformula.

1. Leverage Statistics (H)

Droppingobservation11madethingsatbestthesameasearlier.Weoptedtorecoverthisobservation backintothesample. Insum,theleveragestatisticsdo notnecessarilyimplyanoutlier, butmerelyadistantobservation withfewneighbors.

2. Cooks Distance (D)

Asyoumayalreadyhavenoticed,theregressionimprovedsignificantlyoneverydimension(e.g.R square,stderror,etc.).Salesman#16seemstobeaninfluentialoutlier,sowelldrophim. Regression201Tutorial 8 SpiderFinancialCorp,2013

TheCooksdistancevaluesforthedifferentplotsaredistributedsomewhatuniformly,andwemaystop there. Note:Bearinmindthatourthresholdruleismerelyaheuristic(ruleofthumb),andshouldnotbetaken rigidly,butratherasaguideline.

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