Introduction of regression analysis

The term regression was first introduced in nineteenth century to describe a biological phenomenon,
namely that the progeny of exceptional individuals tends on average to be less exceptional than their
parents and more alike their more distant ancestors. Francis Galton, cousin of Charles Darwin studied
this phenomenon. He said that the mean value of a child’s characteristic (such as height, weight etc.)
was not equal to his /her parents’ height/weight but rather was between this value and the average
value of the entire population. Thus, for instance, the height of the offspring of very tall people (called
by Galton, people “taller than mediocrity”) would tend to be shorter than their parents. Galton called
this phenomenon ‘regression to mediocrity’.

Regression analysis is a statistical tool for the investigation of relationships between variables. Usually,
the investigator seeks to ascertain the causal effect of one variable upon another—the effect of a price
increase upon demand, for example, or the effect of changes in the money supply upon the inflation
rate. To explore such issues, the investigator assembles data on the underlying variables of interest and
employs regression to estimate the quantitative effect of the causal variables upon the variable that
they influence. The investigator also typically assesses the “statistical significance” of the estimated
relationships, that is, the degree of confidence that the true relationship is close to the estimated
relationship.

Objectives of Regression analysis

 Estimate the relationship between explanatory and response variable.

 Determine the effect of each of the explanatory variables on the response variable.
 Predict the value of the response variable for a given value of explanatory variable.