The article studies the advantage of Support Vector Regression (SVR) over Simple Linear Regression (SLR) models. SVR uses the same basic idea as Support Vector Machine (SVM), a classification algorithm, but applies it to predict real values rather than a class. SVR acknowledges the presence of non-linearity in the data and provides a proficient prediction model. Along with the thorough understanding of SVR, we also provide the reader with hands on experience of preparing the model on R. We perform SLR and SVR on the same dataset and make a comparison. The article is organized as follows; Section 1 provides a quick review of SLR and its implementation on R. Section 2 discusses the theoretical aspects of SVR and the steps to fit SVR on R. It also covers the basics of tuning SVR model.

This is a good question, and one that seems to get raised time and time again. Myself and a colleague (Sven Crone from Lancaster University in the UK) published a paper on this issue last year in the International Journal of Forecasting. A summary of our findings can also be found in the book "Credit Scoring, Response Modeling and Insurance Rating. There are also some very good papers by G. Weiss from 2004/5 which are highly cited and referenced in our paper/book. What we found was that for some methods of model construction sample imbalance was not an issue at all – not even a tiny amount.