Linear and Logistic and Logistic RegressionRegression

Where Are We Going Today? A Linear regression example Data how to obtain & manipulate it

Cleaning the data - Splus/R

Analysis Issues

Interpretation How to present the results meaningfully

Application Description forecasting/prediction Traps for the unwary

Logistic regression Conclusions

An example?An example?

Insurance company claims satisfactionInsurance company claims satisfaction

Background:

Top secret company - insurance

Claims satisfaction

546 persons asked to rate aspects of service and then overall satisfaction/likelihood to recommend – 5 point scale

We recommend 10 point scale - as more natural to respondents (1-10)

Major ‘storm in a teacup’

Questionnaire – explanatory variables Thinking firstly about the service you received from (top

secret). I am going to read you some statements about this service and as I read you each statement, please give your opinion using a five-point scale where 1 is extremely dissatisfied and 5 extremely satisfied

(read, rotate (start at x). write in (one digit) per statement) How satisfied or dissatisfied are you with:.

... everything being kept straightforward ... being kept in touch while the claim was being processed

... the general manner and attitude of the staff you dealt with

... your claim being dealt with promptly ... being treated fairly

Questionnaire – dependent variables

4a Using the same five-point scale as previously where 1 is extremely dissatisfied and 5 extremely satisfied, how satisfied or dissatisfied were you with the overall service you received from (Top secret) ?

write in (one digit)

 

4b And, using a five-point scale where 1 is extremely unlikely and 5 extremely likely, how likely or unlikely are you to recommend (Top secret) insurance to others?

write in (one digit)

Data Get DP to create an Excel file with all the data Make your self familiar with Excel formats Clean data Then start analysing the data Use data to describe each aspect of service:…

the time taken to get an appointment with the loss adjustor

the convenience of meeting with the loss adjustor the general manner and attitude of the loss adjustor you

dealt with being kept in touch while your claim was processed... the time taken for repairs to be completed

Data

Some Code for cleaning / inspecting

### cleaning theRegress.eg[,-1][Regress.eg[,-1]==6]<-NAsum(is.na(Regress.eg))[1] 49

mn<-apply(Regress.eg,2,mean,na.rm=T)## replace with mean valuesdata- assumes MCARfor (i in 2:ncol(Regress.eg)){

id<-is.na(Regress.eg[,i])Regress.eg[id,i]<-mn[i]

}dimnames(Regress.eg)

id<-c("Satisfaction","Straight","touch","manner","prompt","fairly","LTR") pairs.20x(Regress.eg[,id])

## let's look at this with a bit of jitterRegress.eg2<-Regress.eg+matrix(rnorm(nrow(Regress.eg)*ncol(Regress.eg),0,.1),ncol=ncol(Regress.eg))

pairs.20x(Regress.eg2[,id])

Matrix plot (with jitter)

More Code

## let’s analyse this data

apply(Regress.eg,2,mean)

cor(Regress.eg)

Regress.eg.coeff<-NULL

for (i in 2:6){

Regress.eg.coeff<-c(Regress.eg.coeff, lm(Regress.eg[,7]~Regress.eg[,i])$coeff[2])

}

Regress.eg.mlr<-lm(formula = Satisfaction ~ Straight +

touch + manner + prompt + fairly, data

= Regress.eg, na.action = na.exclude)

Regress.eg.mlr$coeff

Output Code

> Regress.eg.mlr.coeff

(Intercept) Straightforward kept.in.touch

-0.08951399 0.3802814 0.1624232

manner.attitude prompt fairly

0.08986848 0.2199223 0.1567801

> cbind(apply(Regress.eg, 2, mean)[2:6], cor(Regress.eg)[

2:6, 7], Regress.eg.coeff, Regress.eg.mlr.coeff[

-1])

Regress.eg.coeff

Straightforward 4.329650 0.7982008 0.8010022

kept.in.touch 4.394834 0.7280380 0.7185019

manner.attitude 4.021359 0.6524997 0.5399704

prompt 4.544280 0.6774585 0.8653943

fairly 4.417440 0.7017079 0.6902109

Straightforward 0.38031150

kept.in.touch 0.16243157

manner.attitude 0.08982245

prompt 0.21992244

fairly 0.15680394

Some issues 5 point scale so definitely not normal

Note that the data is very left skew

Regression/correlation assumptions may not hold, except…

CLT may kick in (546 obsn’s) Not probably the best - but still useful

Challenge: can anyone transform y (satisfaction) so it looks vaguely normal

If so how do we interpret these results? Any other solutions?

Questions

With respect to overall satisfaction:

What are the relationships, if any ?

Which are the most important?

What can I tell management?

Can I predict future scores?

Modelling is the Modelling is the answer…answer…

So what is So what is modelling?modelling?

Essence of Modelling Relationships

Understanding causation Understanding the past Predicting the future

# o

f B

abie

s

# of StorksA correlation does not imply Causation

A relationship See Excel spreadsheet

Straightforwardkept in touchmanner/attitude prompt fairly SatisfactionStraightforward 1kept in touch0.726809 1manner/attitude0.684188 0.596709 1prompt 0.663679 0.660653 0.505554 1fairly 0.696842 0.686943 0.624354 0.565666 1Satisfaction 0.798201 0.728037 0.652631 0.677458 0.701706 1LTR 0.689175 0.601961 0.584408 0.59366 0.572402 0.740181

Straightforward vs. Satisfaction

y = 0.801x + 0.8561

R2 = 0.6371

0

1

2

3

4

5

6

0 1 2 3 4 5 6Staright forward

Sat

isfa

ctio

n

Interpretation

Correlation/R2/Straight line equation

For one aspect of service (variable) at a time correlation

measures strength of straight line relationship

between -1 and 1

0 = no straight line relationship (slr)

NB: may not imply no relationship, just not slr!!

-1 perfect -ve slr, +1 perfect -ve slr

R2 = corr. squared .7982012 = .6371

100* R2 = % VARIATION EXPLAINED BY SLR

Interpretation... Correlation/R2 measure strength of slr

not the actual relationship

Regression equation measures size of slr relationship

Satis = 0.8561

+ 0.801x (straight forward score) e.g. if respondent gives a 3; we predict

satis= .8561+ 0.801x ( 3 ) =3.3

Can use this to predict and set targets for KPI’s or key performance indicators

Multiple linear regression SLR except more than one input

ie: more than one input

Correlation not applicable R2 same interpretation

eg: 72% versus 64% for just Straightforward only as an input

Can predict in same way - more inputs satis = -0.08951399+

0.3802814 x Straightforward 0.1624232 x kept in touch 0.08986848 x manner/attitude 0.2199223 x prompt 0.1567801 x fairly

Traps for young players

All models are wrong, some are just more useful than

others

Don’t always assume it is a slr

Multiple regression may not help you much more

problems of multicollinearity ( MC) -redundancy of variables

Correlation does not imply causality

Predicting away from region you have analysed will

probably be wrong!!

Anyone thought of a solution(s) yet?

Output Code

> Regress.eg.mlr.coeff

(Intercept) Straightforward kept.in.touch

-0.08951399 0.3802814 0.1624232

manner.attitude prompt fairly

0.08986848 0.2199223 0.1567801

> cbind(apply(Regress.eg, 2, mean)[2:6], cor(Regress.eg)[

2:6, 7], Regress.eg.coeff, Regress.eg.mlr.coeff[

-1])

Regress.eg.coeff

Straightforward 4.329650 0.7982008 0.8010022

kept.in.touch 4.394834 0.7280380 0.7185019

manner.attitude 4.021359 0.6524997 0.5399704

prompt 4.544280 0.6774585 0.8653943

fairly 4.417440 0.7017079 0.6902109

Straightforward 0.38031150

kept.in.touch 0.16243157

manner.attitude 0.08982245

prompt 0.21992244

fairly 0.15680394

More code> summary(lm(formula = Satisfaction ~ Straightforward +

kept.in.touch + manner.attitude + prompt +

fairly, data = Regress.eg, na.action =

na.exclude))

Call: lm(formula = Satisfaction ~ Straightforward +

kept.in.touch + manner.attitude + prompt +

fairly, data = Regress.eg, na.action =

na.exclude)

Residuals:

Min 1Q Median 3Q Max

-3.687 -0.08301 0.04314 0.133 1.924

Coefficients:

Value Std. Error t value Pr(>|t|)

(Intercept) -0.0895 0.1369 -0.6540 0.5134

Straightforward 0.3803 0.0404 9.4127 0.0000

kept.in.touch 0.1624 0.0370 4.3937 0.0000

manner.attitude 0.0899 0.0270 3.3274 0.0009

prompt 0.2199 0.0415 5.3045 0.0000

fairly 0.1568 0.0345 4.5487 0.0000

Residual standard error: 0.5175 on 540 degrees of freedom

Multiple R-Squared: 0.7217

F-statistic: 280 on 5 and 540 degrees of freedom, the p-value is 0

So what do we conclude?

Note in this case all the MLR estimates are +ve Not always the case because of MC

Using the KISS approach SLR is still useful but note that not much difference between these values So ‘stretch out’ differences by looking at

Index= slr coeff. x corr. Coeff

Presentation of results

Invented the Importance Index individual regressions

avoids problems that can occur with multi-collinearity

adjusted by correlation allows for level of explanation

produce performance by importance matrix

Importance Index by Means

prompt

fairly

kept in touch

straightforward

manner/ attitude

0.2

0.3

0.4

0.5

0.6

0.7

3.9 4 4.1 4.2 4.3 4.4 4.5 4.6

performance (means)

Imp

ort

an

ce

ind

ex

Presentation of results

Strengths

Maintain or divertSecondary drivers

Concern

Interpretation of plot Four quadrants

‘Strengths’ – high performance /high importance – keep up the good work

‘Maintain’ – high performance/low importance – don’t let down your guard, maintain where possible

‘Secondary drivers’ – low performance / low importance - keep an eye on but not too important

‘Concern’ – low value/high importance – this should be the priority area of improvement

Logistic RegressionLogistic Regression

Logistic regression

Suppose we wish look at the proportion of people who give a ‘top box’ score for the satisfaction

Here we have a variable that is binary. Let 0=a 1-4 score and 1 = ‘top box’ or 5

Natural regression is now logistic as we have binary response

We are now in the wonderful world of generalised linear models

Logistic regression

With Linear regression our mean structure linear depends on the explanatory variables:

=XT

With logistic regressionwe have a non-linear response =exp(XTexp(XT

Note that this is a good way of getting around the ‘left skew ness’ of the data

Let’s analyse this data again## Logistic regression code

Regress.eg.logistic<-glm(formula = 1*(Satisfaction==5)~ Straight +

touch + manner + prompt + fairly, data

= Regress.eg, na.action = na.exclude,family=binomial)

Let’s analyse this data again…> cbind(Regress.eg.coeff, Regress.eg.mlr.coeff[-1],

Regress.eg.logistic$coeff[-1])

Straight 0.8010022 0.38028138 1.1928456

touch 0.7185019 0.16242318 0.6297301

manner 0.5399704 0.08986848 0.4143086

prompt 0.8653943 0.21992225 1.0494582

fairly 0.6902109 0.15678007 1.0760604

Note that ‘fairly’ comes up as being more important - ie: this is more high associated with top box figures.

More details summary(glm(formula = 1 * (Satisfaction == 5) ~

Straight + touch +

manner + prompt + fairly, data =

Regress.eg, na.action = na.exclude, family =

binomial))

Deviance Residuals:

Min 1Q Median 3Q Max

-2.252605 -0.3172882 0.4059497 0.4059497 2.825783

Coefficients:

Value Std. Error t value

(Intercept) -19.3572967 1.7395651 -11.127665

Straightforward 1.1928456 0.2674028 4.460857

touch 0.6297301 0.2404842 2.618593

Manner 0.4143086 0.1567237 2.643560

prompt 1.0494582 0.2813209 3.730467

fairly 1.0760604 0.2524477 4.262509

(Dispersion Parameter for Binomial family taken to be 1 )

Null Deviance: 744.555 on 545 degrees of freedom

Residual Deviance: 358.4669 on 540 degrees of freedom

Number of Fisher Scoring Iterations: 5