How can regression analysis be used to formulate strategies?
1 Answer
Calculation of probable trends and relative risks make better decisions on future actions possible.
Explanation:
A “regression” is just a mathematical “fitting” of empirical data to some equation. The ASSUMPTION (be careful!) is that the derived equation will remain valid into the future.
Thus, a regression equation from past data can provide some idea of where future data points will be. Decisions to increase/decrease production, change market locations or products, change product/service prices are all improved to some extent by using regression analysis in the decision process.
Two VERY important points to remember about regression analysis are that 1) Correlation does NOT imply causation, and 2) lack of correlation (a poor-middling regression ‘fit’ coefficient) DOES mean that no useful predictions can be made about the data interaction.
