Data Analysis

Multiple Linear Regression

Video Tutorial

 Multiple Linear Regression in SPSS:

https://www.youtube.com/watch?v=c-NhI37apuE
 Example
 A bank loan officer wanted to inspect the association between
customers’ age, income and the value of the car his prospective
customers purchased. He selected 20 customers randomly and noted
their age, income and the price of the car they purchased. The data are
given below where age is in years and both, income and price, are in
$‘000. Though a minimum sample size of 106 is needed, just for the
purpose of demonstration a sample size of 20 is used in this example.

(cont.)
 Example
Customer Age Income Price Customer Age Income Price
1 33 70 187 11 31 61 162
2 31 61 158 12 35 70 197
3 37 85 226 13 37 67 174
4 31 67 188 14 27 66 178
5 37 70 178 15 25 51 119
6 41 84 199 16 27 52 125
7 35 68 169 17 35 67 162
8 36 67 181 18 49 86 218
9 28 77 193 19 29 68 178
10 29 60 140 20 36 67 160
 Objective and Hypothesis
 Objective: To test the effect of Age and Income on Price

 Hypotheses:
 H0: Price ≠ b0 +b1(Age) + b2(Income)
 Ha: Price = b0 +b1(Age) + b2(Income)
 Data entry
In Variable View

Data View (only partial input is shown)

Matrix Scatter Plot
From the menus choose:
 

Graphs
Legacy Dialog
Scatter /Dot…
 

Matrix Scatter
Define
Matrix variables
 
Age, Income, Price
Then, click OK
Matrix Scatter Plot 1. In the matrix scatter, graph 1 plots
Price against Income. It is seen
that the higher the level of
income, the higher is the value of
the car the purchased.
2. Graph 2 plots Price against Age.
Generally, older the person, the
higher is the value of the car the
purchased.
3. Graph 3 plots Income against Age.
Generally, older the person, the
higher is the income.
Bivariate Correlations
From the menus choose:
 

Analyze
Correlation
Bivariate…
 
Variables:
Age, Income, Price

Then, click OK
Bivariate Correlations
The r values between Age and
Price is 0.649, Income and Price is
0.932 (both > 0.3). Thus, Price is
associated with both Age and
Income.
 
The r value between Age and
Income is 0.742, which is less than
0.85. Perhaps, there is no problem
of multicollinraity.
Linear Regression Analysis
From the menus choose
Analyze
Regression
Linear…
 
Dependent: Price
Independent(s): Age
Income
Method: Enter
Statistics …
Plots ….
Save ….
►OK
Linear Regression Analysis
Statistics… Save…
 Linear Regression Analysis
Statistics… Save… Plots…
 
Y: *ZRESID
X: *ZPRED
Linear Regression Analysis - Output

The R-Square value is 0.872, which means 87.2% of the variation in Price
can be explained by Age and Income. The Durbin-Watson statistic of 1.553 is
not too far from 2.
Linear Regression Analysis - Output

The p-value (sig) from the ANOVA table is less than 0.001, which means that
at least one of the two variables: Age and Income can be used to model Price.
Linear Regression Analysis - Output

The Equation: Price = -7.281 – 0.450(Age) + 2.887(Income)

 
Thus, for every unit increase in Age, Price will drop by 0.450, provided the customer’s Income
level remains unchanged. Similarly, for every unit increase in Income, Price will go up by
2.887 units, provided the customer is still of the same Age.
 
Based on the standardized Beta coefficients, the effect of Income is 1.001, which is about 10
times (1.001/0.093 ~ 10) higher than the effect of Age (0.093 in magnitude).
Linear Regression Analysis - Output

(Cont.)
The p-value for Age is 0.481, which is more than 0.05. Thus, Age is not a significant predictor of Price.
The p-value for Income is less than 0.001 (<0.05). Hence, Income is a significant predictor.
 
The 95% confidence interval (CI) for Age is [-1.765, 0.866], where the value of 0 falls within the
interval, again indicating Age is not a significant predictor. Wherelse, the 95% CI for Income is [2.101,
3.674], where the value of 0 does not fall within the interval, again indicating Income is a significant
predictor.

The VIF values are below 5, indicating that there is no problem of multicollinearity.