Title: From probability to odds to logits
Course: UGQuants (SSPS) > Section: Logistic Regression

From probability to odds to logits

If we 'transform' the probability of the dependent variable taking the value 1 into odds, and then further transform these odds by taking their natural log, or logit, we can get rid of these problems.  In doing so we turn the linear relationship assumed by linear regression into a logistic relationship which fits our purpose much better as the figure below illustrates:

 Let us go through these two transformations in a little more detail.