Chapter 4. Connecting the Dots with Models – Regression Methods

The trend line is a common feature of many business analyses. How much do purchases increase when ads are shown more often on a homepage? What is the average rating of videos on social media based on user age? What is the likelihood that a customer will buy a second product from your website if they bought their first more than 6 months ago? These sorts of questions can be answered by drawing a line representing the average change in our response (for example, purchases or ratings) as we vary the input (for example, user age or amount of past purchases) based on historical data, and using it to extrapolate the response for future data (where we only know the input, but not output yet). Calculating this line is termed regression, based on the hypothesis that our observations are scattered around the true relationship between the two variables, and on average future observations will regress (approach) the trend...