Regression equation
An equation that describes the average relationship between a dependent variable and a set of explanatory variables. |
Similar financial terms
Simple linear regressionA regression analysis between only two variables, one dependent and the other explanatory.
Second pass regression
A cross-sectional regression of portfolio returns on betas. The estimated slope is the measurement of the reward for bearing systematic risk during the period analyzed.
Regression toward the mean
The tendency for subsequent observations of a random variable to be closer to its mean.
Regression analysis
A statistical technique that can be used to estimate relationships between variables.
Multiple regression
The estimated relationship between a dependent variable and more than one explanatory variable.
Linear regression
A statistical technique for fitting a straight line to a set of data points.
Alpha equation
The alpha of a fund is determined as follows:
[ (sum of y) -((b)(sum of x)) ] / n
where: n =number of observations (36 months)
b = beta of the fund)
x = rate of return for the S&P 500)
y = rate of return for the fund)
Beta equation
The beta of a security is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for a benchmark index
y = rate of return for the security
Fisher equation of exchange
Fisher's equation of exchange states MV = PT. M is the money supply; V is the velocity of circulation; P is average prices and T is the number of transactions. This equation is in fact an identity as it will always be true. At its simplest level you could imagine an economy that has a money supply of £5. If this £5 is on average used 20 times in a year, it will have generated £100 of spending. In the Fisher equation above M would be equal to £5, V equal to 20 and PT would be £100. This £100 coul ...
