Slie 1

Definition of Regression :

Two types of regression

 Linear Regression

 Multiple Regression > Restrictions Related to Multiple Regression

> Interpreting Multiple Regression

 The Difference Between Linear and Multiple Regression

Slide 2
Regression helps investment and financial managers to value assets and understand the relationships
between variables, such as commodity prices and the stocks of businesses dealing in those commodities.
The two basic types of regression are linear regression and multiple regression

Slide 3

The case of one explanatory variable is called simple linear regression; for more than one, the process is
called multiple linear regression. This term is distinct from multivariate linear regression, where
multiple correlated dependent variables are predicted, rather than a single scalar variable.

Linear regression attempts to model the relationship between two variables by fitting a linear equation to
observed data. One variable is considered to be an explanatory variable, and the other is considered to be
a dependent variable. For example, a modeler might want to relate the weights of individuals to their
heights using a linear regression model.

Slide 4

A linear regression line has an equation of the form Y = a + bX, where X is the explanatory variable
and Y is the dependent variable. The slope of the line is b, and a is the intercept (the value of y when x =
0).

The data form a perfect relationship (r ~ I, r2 ~ I). For each increase of 10 points in reading, there is a
corresponding increase of 5 points on the cloze test. With such a perfect relationship, you can predict with
complete accuracy where any S will score on one test on the basis of the score on the other.
Slide 5

The chance of ever finding a perfect correlation is, of course, next to never. In addition, few people want
to go to the trouble of drawing a scattcrplot and then plotting out all the scores to see where the scores
intersect in order to find the score of Y given the score on X.