Class 12 - CurvedPattern-part1.pptx - Management Decision...

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Hongyan Liang Department of Business Administration College of Business University of Illinois at Urbana Champaign 11 Curved Patterns – Part 1 1 Management Decision Models BADM 374 - Business Analytics
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2 In linear regression, we can only fit a linear function. In other words, we can only fit a straight line. If the pattern of data is linear, then the linear function can capture the trend in the data. However, if the pattern of data is curved, a linear line may not be able to capture the trend in the data.
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Detecting Curved Patterns Detecting Curved Patterns What improvement in mileage should a manufacturer expect from reducing the weight of a car? Data: cars.xlsx 3 Simple linear regression:
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Does trimming 200 pounds from a large SUV have the same effect on mileage as trimming 200 pounds from a small compact? 4
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Transformations Transformations Transformations allow the use of regression analysis to describe a curved pattern Two nonlinear transformations useful in business applications: reciprocal and logarithms.
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