Regression Analysis

Variables Regression Equation r

2
r Adjusted
r2

Age of Owner (X1),
Net asset Value of Owner (X2),
Amount of Loan (X3),
Maturity (X4),
Value of Collateral (X5),
Monthly Installment (X6),
Interest Rate (X7)
Collection Performance =
322556-4263 Age-
0.0039NAV + 0.4789
AmountLoan - 2188 Maturity
+0.0123 Value of Collateral -
13.44 Installment -
19642Interest rate
0.6645 0.8539 0.52644
Output of Regression Analysis is presented in Appendix
Dependent Variables
Collection performance which represents the amount of collection of loan.
Multiple Regressions
=a+b1X1+b2X2+b3X3+b4X4+b5X5+b6X6+b7X7
=322556-4263X1-0.0039X2+0.4789X3-2188X4+0.0123X5-13.44X6-19642X7
R
It is the coefficient of correlation. It shows the positive or negative correlation between dependent
variable of Collection performance and independent variable of Age of owner, Net Asset Value
(NAV) of owner, Amount of loan, Maturity period, Value of collateral, Monthly installment &
Interest Rate. Here the value of R is 0.8539 that indicates the independent variables (Age of owner,
Net Asset Value (NAV) of owner, Amount of loan, Maturity period, Value of collateral, Monthly
installment & Interest Rate) are moderately positively related with the dependent variable
(Collection performance).
R
2

It is the coefficient of determination. If we change the independent variables by some units then
the dependent variables also became changed and how much changed is done by these seven
independent variables, is shown by R
2
. Here the value of R
2
comes 0.6645 meaning that 66.45 %
changes in the dependent variable are happening for the changes of the independent variables. And
the least part (1 - 0.6645) = 0.3355 is changed by other factors which are not considered. But it
cant show the practical and logical change of the dependent variable happened by the independent
variables.

Adjusted R
2

It is the actual coefficient of determination. If we add an independent variable then the R also
became changed and Adjusted R
2
shows logically how much value change is possible and thats
why the value of Adjusted R
2
is always less than the value of R
2
. From our accepted date the value
of Adjusted R
2
is 0.5264. It shows actually how much dependent variable is changed for the
changing of independent variables.
Standard Error of Estimate:
It shows how much error or variability stands between the predicted result and actual observed
result. Here the value is 40913 that show the amount of variability of our predicted result and the
actual result acquired from the real observation.
Multiple Regressions Analysis & Interpretation of the Equation
= a + b1X1 + b2X2 + b3X3+b4X4+b5X5+b6X6+b7X7
=322556-4263X1-0.0039X2+0.4789X3-2188X4+0.0123X5-13.44X6-19642X7
In this multiple regression equation, we have demonstrated the relationship between Collection
performance with independent variable of Age of owner, Net Asset Value (NAV) of owner,
Amount of loan, Maturity period, Value of collateral, Monthly installment & Interest Rate.
Dependent Variable = Collection performance
Independent Variable X1 = Age of owner
Independent Variable X2 = Net Asset Value (NAV) of owner
Independent Variable X3 = Amount of loan
Independent Variable X4 = Maturity period
Independent Variable X5 = Value of collateral
Independent Variable X6 = Monthly installment
Independent Variable X7 = Interest Rate
Here, b1 is the slope of X1 , b2 is the slope of X2, b3 is the slope of X3, b4 is the slope of X4, b5 is
the slope of X5, b6 is the slope of X6, b7is the slope of X7. If the Age of owner, Net Asset Value
(NAV) of owner, Amount of loan, Maturity period, Value of collateral, Monthly installment &
Interest Rate equal to zero then, = a = 322556
Now, the value of b1 or the slope of X1 is -4263 it means if the Age of owner decreases by year 1
then the recovery amount of loan of the bank increases for TK. 4263 assuming all other variables
are constant.
Next, the value of b2 or the slope of X2 is -0.0039. It means if the volumes Net Asset Value (NAV)
of owner by TK. 1 then the recovery amount of loan of the bank decrease for TK. 0.0039 assuming
all other things are remaining same.
Next, the value of b3 or the slope of X3 is 0.4789 it means if the Amount of loan increases by TK.
1% then the recovery amount of loan of the bank increases for TK. 0.4789 assuming all others
variables is constant.
Next, the value of b4 or the slope of X4 is -2188 it means if the maturity period increases by 1
month then the recovery amount of loan of the bank decreases for TK. 2188 assuming all other
variables are constant.
Next, the value of b5 or the slope of X5 is 0.0123 it means if the value of collateral increases by
TK. 1, then the recovery amount of loan of the bank increases for TK. 0.0123 assuming that all
other variables are constant.
Next, the value of b6 or the slope of X6 is -13.44 it means if the amount of monthly installment
increases by TK. 1, then the recovery amount of loan of the bank dencreases for TK. 13.44
assuming that all other variables are constant.
Next, the value of b6 or the slope of X6 is -19642 it means if the interest rate increases by 1%, then
the recovery amount of loan of the bank decreases for TK. 19642 assuming that all other variables
are constant.