ACCA Paper F2 free course note | Correlation & Regression | What is Regression

The dictionary meaning of the term “regression” is the act of returning or going back. The term “regression” was first used in 1877 by Francis Galton while studying the relationship between the height of fathers and sons.

Regression analysis is the technique used to develop the equation and provide the estimate. In regression, we develop an equation to express the linear relationship between two variables. In addition, we are able to estimate the value of the dependent variable Y based on a selected value of the independent variable X.

The statistical tool with the help of which we are in a position to estimate (or predict) the unknown values of one variable from known values of another variable is called regression.

With the help of regression analysis we are in a position to find out the average probable change in one variable given a certain amount of change in another variable.

For example, if we know that advertisement and sales are correlated, we may find out the expected amount of sales for a given advertisement expenditure or the required amount of expenditure for achieving a fixed sales target.

Differences between correlation and regression analysis

There are two important points of difference between correlation and regression analysis. These are

v  Correlation coefficient measures the degree of association between two or more than two variables, whereas regression analysis measures the nature of relationship between the variables.

v  In case of correlation analysis, it never measure cause and effect relationship whereas regression analysis specially measures this.

Regression Line

Regression line is the graphical presentation of equation. It is a line drawn through a scatter plot of two variables If we take the case of two variables X and Y, we shall have two regression lines as the regression line of X on Y and the regression line of Y on X.