ryanlb

To expand on the previous post:

Suppose a company's sales grow at 10% a year:

1) 100k 2)110k 3)121k 4)133.1k 5)146.41k

Trying to use a linear regression model simply will not work. Our predictions would be based on the assumption that there is a linear relationship amongst our variables which we have defined them not to be.

However, by using the Log Linear function, we're able to convert the pattern into one that is effectively linear, thereby allowing us to use a regression equation to try to explain the future.

The reason a Log Linear function works, is because we are essentially removing the exponential and converting it into a coefficient (at least thats how I look at it)