Multiple Regression Models

Probabilistic Multiple Regression Model

Y = 0 + 1X1 + 2X2 + 3X3 + . . . + kXk+
Y = the value of the dependent (response) variable
0 = the regression constant
1 = the partial regression coefficient of independent variable 1
2 = the partial regression coefficient of independent variable 2
k = the partial regression coefficient of independent variable k
k = the number of independent variables
= the error of prediction

Estimated Regression Model

Y b0 b1 X 1 b 2 X 2 b3 X 3 b k X k
where : Y predicted value of Y
b0 estimate of regression constant
b1 estimate of regression coefficien t 1
b 2 estimate of regression coefficien t 2
b3 estimate of regression coefficien t 3
b k estimate of regression coefficien t k
k = number of independen t variable s

Multiple Regression Model with

Two Independent Variables (FirstOrder)
Y 0 1 X 1 2 X 2

where:

Population
Model

= the regression constant

the partial regression coefficient for independent variable 1
the partial regression coefficient for independent variable 2

= the error of prediction

Y b b X b X
0

where: Y predicted value of Y

b
b
b
0

estimate of regression constant

estimate of regression coefficient 1

estimate of regression coefficient 2

Estimated
Model

Least Squares Equations for k = 2

b n b X b X Y
b X b X b X X X Y
b X b X X b X X Y
0

A real estate study was conducted in a small Louisiana city to

determine what variables, if any, are related to the market price of a
home. Several variables were explored including the number of
bedrooms, the age of the house, the number of square feet of living
space, the total number of square feet of space and the number of
garages. Suppose the researcher wants to develop a regression model
to predict the market price of a home by two variables. total number
of square feet in the house and the age of the house. Listed in the
table are the data for these three variables.

Observation
1
2
3
4
5
6
7
8
9
10
11
12

Market
Price
($1,000)
Y
63.0
65.1
69.9
7
76.8
73.9
77.9
74.9
78.0
79.0
63.4
79.5
83.9

Square
Feet
X1
1,605
2,489
1,553
2,404
1,884
1,558
1,748
3,105
1,682
2,470
1,820
2,143

Age
(Years)
X2
35
45
20
32
25
14
8
10
28
30
2
6

Observation
13
14
15
16
17
18
19
20
21
22
23

Market
Price
($1,000)
Y
79.7
84.5
96.0
109.5
102.5
121.0
104.9
128.0
129.0
117.9
140.0

Square
Feet
X1
2,121
2,485
2,300
2,714
2,463
3,076
3,048
3,267
3,069
4,765
4,540

Age
(Years)
X2
14
9
19
4
5
7
3
6
10
11
8

Predicting the Price of Home

Y 57.4 0.0177 X 1 0.666 X 2
For X 1 2500 and X 2 12,
Y 57.4 0.01772500 0.66612
93.658 thousand dollars

Residuals and Sum of Squares

Error for the Real Estate Example
Observation
1
2
3
4
5
6
7
8
9
10
11
12

Y
43.0
45.1
49.9
56.8
53.9
57.9
54.9
58.0
59.0
63.4
59.5
63.9

42.466
51.465
51.540
58.622
54.073
55.627
62.991
85.702
48.495
61.124
68.265
71.322

Y Y

0.534
-6.365
-1.640
-1.822
-0.173
2.273
-8.091
-27.702
10.505
2.276
-8.765
-7.422

Y Y

0.285
40.517
2.689
3.319
0.030
5.168
65.466
767.388
110.360
5.181
76.823
55.092

Y Y

Observation
13
14
15
16
17
18
19
20
21
22
23

Y
59.7
64.5
76.0
89.5
82.5
101.0
84.9
108.0
109.0
97.9
120.0

65.602
75.383
65.442
82.772
77.659
87.187
89.356
91.237
85.064
114.447
112.460

SSE

Y Y

-5.902
-10.883
10.558
6.728
4.841
13.813
-4.456
16.763
23.936
-16.547
7.540

34.832
118.438
111.479
45.265
23.440
190.799
19.858
280.982
572.936
273.815
56.854
2861.017

SSE and Standard Error

of the Estimate
ANOVA

Regression
Residual (Error)
Total

df
SS
2 8189.7
20 2861.0
22 11050.7

MS
4094.9
143.1

SSE
n k 1

2861
23 2 1
1196
.
where: n = number of observations
k = number of independent variables

F
28.63

SSE

P
.000

Coefficient of Multiple
Determination (R2)
SSYY
ANOVA
Regression
Residual (Error)
Total

SSR

SSE
df
SS
2 8189.7
20 2861.0
22 11050.7

MS
4094.89
143.1

SSR 8189.723
R SSY 11050.74 .741
SSE
2861017
.
2
R 1 SSY 1 11050.74 .741
2

F
28.63

p
.000