Wednesday, September 30, 2009

FUNCTION INTERCEPT & SLOPE (Calculating Alpha & Beta)

INTERCEPT (Calculating ALPHA)

This function calculates the point at which a line will intersect the y-axis by using existing x-values and y-values. The intercept point is based on a best-fit regression line plotted through the known x-values and known y-values. Use the INTERCEPT function when you want to determine the value of the dependent variable when the independent variable is 0 (zero). For example, you can use the INTERCEPT function to predict a metal's electrical resistance at 0°C when your data points were taken at room temperature and higher.

In Statistics this is known as calculating alpha “α”

How does it work?

=INTERCEPT(known_y's,known_x's)
Where…
Known_y's is the dependent set of observations or data.
Known_x's is the independent set of observations or data.


Remarks

- The arguments should be either numbers or names, arrays, or references that contain numbers.

- If an array or reference argument contains text, logical values, or empty cells, those values are ignored; however, cells with the value zero are included.

- If known_y's and known_x's contain a different number of data points or contain no data points, INTERCEPT returns the #N/A error value.




SLOPE (Calculating BETA)

This function returns the slope of the linear regression line through data points in known_y's and known_x's. The slope is the vertical distance divided by the horizontal distance between any two points on the line, which is the rate of change along the regression line.

In Statistics this is known as calculating beta “β”

How does it work?

=SLOPE(known_y's,known_x's)
Where…
Known_y's is an array or cell range of numeric dependent data points.
Known_x's is the set of independent data points.


Remarks

- The arguments must be either numbers or names, arrays, or references that contain numbers.

- If an array or reference argument contains text, logical values, or empty cells, those values are ignored; however, cells with the value zero are included.

- If known_y's and known_x's are empty or have a different number of data points, SLOPE returns the #N/A error value.

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