In this article, I would like to propose Linear Regression in a simple and easy way so

that even a newbie can understand the mechanism without remembering it as an

algorithmic concept.

## INTRODUCTION

Regression algorithm – we use this when the target variable (or dependent variable: the variable that we predict) is a continuous variable (100, …, 2000). For example, to predict the price of the house given its sq.area. The house price will increase if the sq. area increases or with the no of bed rooms or the house location. We can conclude that the sq.area inﬂuences the price of the house. Hence there is a strong relationship between the sq.area of the house and the house price. In mathematical terms this refers to “Regression”. The price is dependent on the area of the house and so it is called “Dependent Variable”; whereas sq.area is called “Independent Variable”. There can be multiple factors inﬂuencing the house price such as location, no. of bedrooms, etc. All such factors have a relationship with the price which we can write statistically as an equation.

## TABLE OF CONTENTS

- Traditional Deﬁnition of Linear Regression
- Important Assumptions of simple linear regression
- Idea behind Linear Regression:
- How to perform a simple linear regression
- Interpreting the results
- Why to use Linear Regression
- Disadvantages of Linear Regression
- Conclusion

## Traditional Definition of Linear Regression

Linear Regression is a statistical model used to predict the relationship between independent and dependent variables denoted by x and y respectively.

The linear regression equation is based on the formula for a simple linear equation.

For example, the equation can be

y = 0.32 x1 + 0.5 x2 + 0.66 x3

where the 0.32, 0.5, 0.66 are the weights of the equation. These weights are to be learned by studying the relationship between the independent and dependent variables.

## Important Assumptions of simple linear regression

Simple linear regression is based on parametric test, meaning that it makes certain assumptions about the data. Consider these assumptions before doing Regression

#### Analysis:

**Linearity :**the line of best ﬁt through the data points is a straight line (rather than a curve or some sort of grouping factor). L.R is the simplest non-trivial relationship between Independent and dependent variables.**No Endogeneity of regressors:**When there is a correlation between Independent variable (x) and the error term in the model, we refer this problem as OVB (Omitted Variable Bias). This problem occurs when you forget to include a relevant variable.**Homogeneity of variance (homoscedasticity):**Error terms to have equal variance.**No Multicollinearity:**There are no hidden relationships among Independent variables/observations.**Normality:**We assume that the error term is normally distributed or the data follows normal distribution.

## Idea behind Linear Regression:

- The core idea is to obtain a line that best ﬁts the data. The best ﬁt line is the one for which total prediction error (all data points) are as small as possible. Error is the distance between the data point and best ﬁt line (regression line).
- Choose the values a and b so that they minimize the error.
- We can train this algorithm using multiple methods, we can use statistics to calculate a and b , or we can use Ordinary Least Square method to calculate a and b, or we can use gradient descent to calculate a and b.

## How to perform a simple linear regression

#### Simple linear regression formula

The formula for a simple linear regression is:

- y is the predicted value / dependent variable
- B0 is the intercept, the predicted value of y when the x is 0.
- B1 is the regression coefﬁcient – how much we expect y to change as x increases.
- x is the independent variable ( the variable we expect is inﬂuencing y).
- e is the error of the estimate, or how much variation there is in our estimate of the regression coefﬁcient.

Smaller the value of error, the more accurate the prediction will be, which would make the

model the best ﬁt.

#### Simple linear regression in Python

`from sklearn.datasets import load_boston`

import pandas as pd

import matplotlib.pyplot as plt

We will use boston dataset from sklearn library, along with that we’ll also import pandas

library and provide alias as pd; numpy library as np and matplotlib will be used to plot linear

regression graph.

`bs = load_boston()`

Now, we’ll load the boston data and store in bs variable

`print(bs.DESCR)`

(Optional) If you want to know about the boston dataset like the variables and their uses and

meaning, you can use .DESCR (Description) method to get more details

`boston = pd.DataFrame(bs.data, columns = bs.feature_names)`

Convert the boston dataset into pandas DataFrame for further computations. Because if you will

check the type of bs variable it will give you the output as below:

type(bs) > sklearn.utils.Bunch

Check the boston data now

Now, we’ll split out boston dataset into training and test set using sklearn library as below

from sklearn.model_selection import train_test_split as split

train, test = split(boston, test_size = 0.20, random_state = 12)

The data is split into 20% test set and 80% of training set and provided random_state = 12 (basically you can give any value to random_state, as every time you will execute this line the train and set will always have same sort of records otherwise the data shufﬂes on every run)

##### We’ll do Model Development after splitting of data

from sklearn.linear_model import LinearRegression

Import Linear Regression from sklearn.linear_model library

#create a model object lm = LinearRegression()

lm is the model object for our simple linear regression model

#Fit the model X = train[['RM']] # always needs to be dataframe y= train.MEDV # always a Series

RM is the Independent variable (description of RM: average number of rooms per dwelling)

MEDV is the Dependent Variable (that we will predict. Description of MEDV: Median value of owner-occupied homes in $1000’s)

We’ll train our simple linear regression model on the Independent and dependent variable.

##### Plotting the Linear regression Graph

y_cap = lm.predict(train[['RM']]) plt.figure(figsize = (10,5)) plt.scatter(x=train.RM, y=train.MEDV) plt.plot(train.RM, y_cap,color = 'red') plt.show();

## Interpreting the results

from statsmodels.formula.api import ols # ordinary least square mod = ols(formula='MEDV ~ RM', data = train) lm_fit = mod.fit() lm_fit.summary()

This function takes the most important parameters from the linear model and puts them into a table, which looks like this:

**R-Square:** It explains “ percentage variation in Dependent variable is explained by the Independent variable”. In the above table 48.6% in y is explained by x variable.**Adj. R-squared: **This is the advanced version of R-squared which is adjusted for the number of variables in the regression. It increases only when an additional variable adds to the explanatory power to the regression.**Prob(F-Statistic):** This tells the overall signiﬁcance of the regression. This is to assess the signiﬁcance level of all the variables together. Prob(F-statistics) depicts the probability of null hypothesis being true.

The **t value** column displays the test statistic. Unless you specify otherwise, the test statistic used in linear regression is the t-value from a two-sided t-test. The larger the test statistic, the less likely it is that our results occurred by chance.

The **Pr(>| t |)** column shows the p-value. This number tells us how likely we are to see the estimated effect of the average number of rooms on Median value if the null hypothesis of no effect were true.

Because the p-value is so low (p < 0.001), we can reject the null hypothesis and conclude that the average number of rooms has a statistically signiﬁcant effect on Median value. The last three lines of the model summary are statistics about the model as a whole. The most important thing to notice here is the p-value of the model. Here it is signiﬁcant (p < 0.001), which means that this model is a good ﬁt for the observed data.

##### Explanation of Linear Regression Graph

- The ﬁgure illustrates the linear regression model, where:
- Black points are the dataset points
- The best – ﬁt regression line (which is in blue)
- Intercept (b0) and the slope (b1) are shown in green
- Error terms (e) are represented by vertical red lines

Smaller the value of error, the more accurate the prediction will be, which would make the

model the best ﬁt.

## Why to use Linear Regression

#### Simple Implementation:

- When we know the relationship between the Independent and dependent variable have a linear relationship, this algorithm is the best to use because it’s the least complex to compound to other algorithms that also try ﬁnding the relationship between independent and dependent variables.
- We can use to ﬁnd the nature of the relationship between the variables.
- It is the most basic and widely used technique to predict a value of an attribute.
- Easy to use as the model does not require a lot of tuning.
- It runs very fast, which makes it more time -efﬁcient

## Disadvantages of Linear Regression

- Linear Regression assumes that the data is independent

a. Very often the inputs aren’t independent of each other and hence any multicollinearity must be removed before applying linear regression. - Sensitive to outliers

a. Outliers of a data set are anomalies or extreme values that deviate from the other data points of the distribution.Data outliers can damage the performance of a model drastically and can often lead to models with low accuracy. - Prone to underﬁtting

a. Underﬁtting : A situation that arises when a model fails to capture the data properly.

b. Linear models are also often not that good regarding predictive performance, because the relationships that can be learned are so restricted and usually oversimplify how complex reality is.

c. The interpretation of a weight can be unintuitive because it depends on all other features. A feature with high positive correlation with the outcome y and another feature might get a negative weight in the linear model, because, given the other correlated feature, it is negatively correlated with y in the high-dimensional space.

## Conclusion

This article gave you an idea about linear regression. It explains with the help of an example and uses sklearn library . We discuss few advantages as well as disadvantages of linear regression.