You have discovered dozens, perhaps even hundreds, of factors that can possibly affect the numbers. Imagine this: you are provided with a whole lot of different data and are asked to predict next year's sales numbers for your company. The error term accounts for the fact that the part of salary is due to other factors not included in our model.The tutorial explains the basics of regression analysis and shows a few different ways to do linear regression in Excel. The light blue diamonds show the actual relationship: Y i = a + bX i + error i a perfectly straight line from the equation: Y i = a + bX i The green squares show the “predicted” relationship, i.e. We can also look at the line fit plot to get a visual feel for how “linear” the relationship is: In this case, its value is 0.60, which indicates that about 60% of salary is determined by education (so about 40% is determined by other factors).
We should also look at the “Adjusted R Square” statistic in cell B6 to determine how strong the relationship between salary and education is.
#Equation of the regression line excel 2013 plus#
We interpret it as: on average, a person’s salary is $12,226 plus $1,833 each year of education he/she has. So, our regression equation is: Salary = 12,226 + 1833(Education) the value of “b” from the equation: Y i = a + bX i + error i the value of “a” from the equation: Y i = a + bX i + error iĬell B18 contains the slope, i.e. Now, click OK and Excel will perform the linear regression, and put the output on a new page:Ĭell B17 contains the “intercept” i.e. Since we have labels at the top of each data column (and included their cells in the ranges above) click the “Labels” checkbox and then click the “Line Fit Plots” checkbox. Next, click inside the box labelled “Input X Range:” and then click on cell C1 and hold the left mouse button down and highlight cells C1 through C14 Scroll down until you see the “Regression” tool, click on it, then click OK.Ĭlick inside the box labeled “Input Y Range:”Ĭlick on cell B1 and hold the left mouse button down and highlight cells B1 throught B14 For ease of computation, it helps to put the dependent variable (Y) in the left column, and the independent variable (X) in the right column.Ĭlick on “Data” and then “Data Analysis” and a window like this will appear. You start by collecting a list observations or data, and recording them in your spreadsheet. due to other factors (age, years on job, etc.) error i = portion of Y (salary) that is unrelated to X (education), i.e.X i = value of X (education) for observation i.the average increase in salary for each additional year of education b = average change in Y (salary) given a one unit increase in X (education), i.e.a = average value of Y (salary) when X (education) is zero.Y i = value of Y (salary) for observation i.Suppose you want to determine whether a person’s salary is a function of his or her education level (measured in years). A linear regression is just a statistical tool used to determine whether or not two (or more) variables are linearly related.īefore you can perform a linear regression with Excel, you need to make sure the “Analysis ToolPak” is installed.
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