Question

Explain each in a few sentences:

a.

What is the purpose / goal of running a regression?

(2 points)

b.

What are the

regressand, regressor, dependent variable and

independent variable in the regression context?

(1 point

Answer 1

Ans:

a)

The goal in regression analysis is to create a mathematical model that can be used to predict the values of a dependent variable based upon the values of an independent variable.

Regression analysis is also used to understand which among the independent variables are related to the dependent variable, and to explore the forms of these relationships.

b)

Regressor is the independent variable in a regression equation.

Regressand is the dependent variable of the regression equation.

Suppose we have a linear relationship as:

Y=a+bX+u

Where Y is the consumption expenditure and X is the income of the individual and u is the error term.

So here Consumption depends on the level of income, so it is the regressand. But income is independent of consumption so its the independent variable or regressor.

Regressors are also known as explanatory variables as they help to explain the relationship given by the regression equation