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Chapter 15. Using Regression to Track Tr... > Choosing a Regression Method

Choosing a Regression Method

Three methods of regression analysis are used most often in business:

  • Simple regression— Use this type of regression when you're dealing with only one independent variable. For example, if the dependent variable is car sales, the independent variable might be interest rates. You also need to decide whether your data is linear or nonlinear:

    • Linear means that if you plot the data on a chart, the resulting data points resemble (roughly) a line.

    • Nonlinear means that if you plot the data on a chart, the resulting data points form a curve.

  • Polynomial regression— Use this type of regression when you're dealing with only one independent variable, but the data fluctuates in such a way that the pattern in the data doesn't resemble either a straight line or a simple curve.

  • Multiple regression— Use this type of regression when you're dealing with more than one independent variable. For example, if the dependent variable is car sales, the independent variables might be interest rates and disposable income.


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