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Regression toward the mean |
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Definition of Regression toward the meanRegression toward the meanThe tendency for subsequent observations of a random variable to be closer to its mean.
Related Terms:Arithmetic average (mean) rate of returnArithmetic mean return. Arithmetic mean returnAn average of the subperiod returns, calculated by summing the subperiod returns First-pass regressionA time series regression to estimate the betas of securities portfolios. Geometric mean returnAlso called the time weighted rate of return, a measure of the compounded rate of least squares regression analysisa statistical technique that investigates the association between dependent and independent variables; it determines the line of "best fit" for a set of observations by minimizing the sum of the squares Linear regressionA statistical technique for fitting a straight line to a set of data points. MeanThe expected value of a random variable. Mean a. A number that typifies a set of numbers, such as a geometric mean Mean of the sampleThe arithmetic average; that is, the sum of the observations divided by the number of Mean-variance analysisEvaluation of risky prospects based on the expected value and variance of possible outcomes. Mean-variance criterionThe selection of portfolios based on the means and variances of their returns. The Mean-variance efficient portfolioRelated: Markowitz efficient portfolio Multiple regressionThe estimated relationship between a dependent variable and more than one explanatory variable. multiple regressiona statistical technique that uses two or Regression analysisA statistical technique that can be used to estimate relationships between variables. Regression analysisStatistical analysis techniques that quantify the Regression equationAn equation that describes the average relationship between a dependent variable and a regression lineany line that goes through the means (or averages) of the set of observations for an independent variable and its dependent variables; mathematically, there is a line of “best fit,” which is the least squares regression line Second pass regressionA cross-sectional regression of portfolio returns on betas. The estimated slope is the Simple linear regressionA regression analysis between only two variables, one dependent and the other explanatory. simple regressiona statistical technique that uses only one independent variable to predict a dependent variable
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