# Linear Regression and Binary Data

## Beginning

I'm going to look at binary classification (two classes) and linear regression. In particular I'm going to use the Credit Card Balance data set (James et al., 2013) to look at how to interpret the linear model once we encode gender.

### Set Up

#### Imports

First, some importing.

# python
from functools import partial
from pathlib import Path

import math
import os
import pickle

# pypi
from expects import (
be_true,
expect
)
import hvplot.pandas
import pandas
import statsmodels.api as statsmodels
import statsmodels.formula.api as statsmodels_formula

# my stuff
from graeae import EmbedHoloviews, CountPercentage


#### The Environment

This loads the path to files.

load_dotenv(".env")


#### Plotting

This just sets up some convenience values for plotting.

SLUG = "linear-regression-and-binary-data"
Embed = partial(EmbedHoloviews,
folder_path=f"files/posts/{SLUG}")



#### The Data

data = pandas.read_csv(Path(os.environ["CREDIT"]).expanduser(), index_col=0)


I passed in the index_col argument because the first column is a index column with no header, so it just looks goofy if you don't. There are several columns but I only want Gender and Balance (the credit card balance).

data = data[["Gender", "Balance"]]


## Middle

### The Data

Now that we have the data we can take a quick look at what's there.

counter = CountPercentage(data.Gender, value_label="Gender")
print(counter())

Gender Count Percent (%)
Female 207 51.75
Male 193 48.25

Our two classes are "Female" and "Male" and they are roughly, but not quite, equal in number. Now I'll look at the balance.

plot = data.hvplot.kde(y="Balance", by="Gender", color=Plot.color_cycle).opts(
width=Plot.width,
height=Plot.height,
fontscale=Plot.font_scale,
title="Credit Card Balance Distribution by Gender"
)

output = Embed(plot=plot, file_name="balance_distributions")()

print(output)


It looks like there are two populations for each gender. The larger one for both genders is centered near 0 and then both genders have a secondary population that carries a balance.

### Encode the Gender

Since the Gender data is categorical we need to create a dummy variable to encode it. So what I'm going to do is encode males as 0 and females as 1 (because of the nature of binary encoding, we could swap the numbers and it would still work).

gender = dict(
Male=0,
Female=1,
)

data["gender"] = data.Gender.map(gender)
print(data.gender.value_counts())

1    207
0    193
Name: gender, dtype: int64


### Fit the Regression

Now I'll fit the model with statsmodels, which uses r-style arguments (I think it supports regular python arguments too).

model = statsmodels_formula.ols("Balance ~ gender", data=data).fit()
print(model.summary())

                            OLS Regression Results
==============================================================================
Dep. Variable:                Balance   R-squared:                       0.000
Method:                 Least Squares   F-statistic:                    0.1836
Date:                Sun, 02 Aug 2020   Prob (F-statistic):              0.669
Time:                        16:55:01   Log-Likelihood:                -3019.3
No. Observations:                 400   AIC:                             6043.
Df Residuals:                     398   BIC:                             6051.
Df Model:                           1
Covariance Type:            nonrobust
==============================================================================
coef    std err          t      P>|t|      [0.025      0.975]
------------------------------------------------------------------------------
Intercept    509.8031     33.128     15.389      0.000     444.675     574.931
gender        19.7331     46.051      0.429      0.669     -70.801     110.267
==============================================================================
Omnibus:                       28.438   Durbin-Watson:                   1.940
Prob(Omnibus):                  0.000   Jarque-Bera (JB):               27.346
Skew:                           0.583   Prob(JB):                     1.15e-06
Kurtosis:                       2.471   Cond. No.                         2.66
==============================================================================

Warnings:
[1] Standard Errors assume that the covariance matrix of the errors is correctly specified.


The model is something like this:

$balance = \beta_0 + \beta_1 \times gender$

Since we encoded Male as 0 and Female as 1, when the gender is Male the second term drops out and all you have is $\beta_0$, while for females you have have the full equation. How do you interpret the $\beta$s?

• $\beta_0$ is the average balance that males carry
• $\beta_0 + \beta_1$ is the average balance that females carry
• $\beta_1$ is the difference between the average balances

We can check this by comparing the coef entry in the summary table that I printed. The Intercept is $\beta_0$ and gender is $\beta_1$

male_mean = data[data.Gender=="Male"].Balance.mean()
female_mean = data[data.Gender=="Female"].Balance.mean()
print(f"Average Male Balance: {male_mean:.7}")
print(f"Average Female Balance: {female_mean:0.7}")
print(f"Average difference: {female_mean - male_mean:0.7}")

expect(math.isclose(male_mean, model.params.Intercept)).to(be_true)
expect(math.isclose(female_mean - male_mean, model.params.gender)).to(be_true)

Average Male Balance: 509.8031
Average Female Balance: 529.5362
Average difference: 19.73312

data = data.sort_values(by="Balance")
data["prediction"] = model.predict(data.gender)

scatter = data.hvplot.scatter(x="Balance", y="prediction", by="Gender",
color=Plot.color_cycle).opts(
width=Plot.width,
height=Plot.height,
title="Gender Model",
fontscale=Plot.font_scale,
)

output = Embed(plot=scatter, file_name="Gender Model")()

print(output)


I didn't set up a hypothesis test, but if you look at the p-value (the P>|t| column in the summary) for gender you can see that it's much larger than 0.05 or whatever level you would normally choose, so it's probable that gender isn't significant, so the average balance for both genders is really the same, given the deviation, but this is just about interpreting the coefficients, not deciding the validity of this particular model.

## End

So there you have it. If you have the specialized case of binary categorical data you can convert the category to dummy variables and then fit a linear regression to it. If you encode the values as 0 and 1 then the y-intercept will give you the average output value for the category set to 0 and the slope will give you the difference between the average outputs for the categories. If you use different dummy variables the meanings will change slightly, although you will still be inferring things about the averages. Why is this interesting - predicting the mean for each category?

Logistic regression also relies on dummy variables for categorical encodings and this shows a preliminary step that helps us:

• encode the dummy variables
• build a linear model using statsmodels
• view summary information about the model

I didn't emphasize it, but the p-value for the f-statistic might be valuable when deciding whether the categorical data is different enough to use as a feature.