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Second pass regression

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Definition of Second pass regression

Second Pass Regression Image 1

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.



Related Terms:

Agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are
guaranteed by government agencies, such as the Government National Mortgage Association ("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association ("Fannie Mae").


Conventional pass-throughs

Also called private-label pass-throughs, any mortgage pass-through security not
guaranteed by government agencies. Compare agency pass-throughs.


First-pass regression

A time series regression to estimate the betas of securities portfolios.


Fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and
principal. Related: modified pass-throughs
Functional currency As defined by FASB No. 52, an affiliate's functional currency is the currency of the
primary economic environment in which the affiliate generates and expends cash.


least squares regression analysis

a 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
of the vertical deviations between actual points and the
regression line; it can be used to determine the fixed and
variable portions of a mixed cost



Linear regression

A statistical technique for fitting a straight line to a set of data points.


Modified pass-throughs

Agency pass-throughs that guarantee (1) timely interest payments and (2) principal
payments as collected, but no later than a specified time after they are due. Related: fully modified passthroughs


Second Pass Regression Image 2

Mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash
flow from the collateral pool is "passed through" to the security holder as monthly payments of principal,
interest, and prepayments. This is the predominant type of MBS traded in the secondary market.


Multiple regression

The estimated relationship between a dependent variable and more than one explanatory variable.


multiple regression

a statistical technique that uses two or
more independent variables to predict a dependent variable


Pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate
paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.


Pass-through rate

The net interest rate passed through to investors after deducting servicing, management,
and guarantee fees from the gross mortgage coupon.


Pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
where the holder receives the principal and interest payments. Related: mortgage pass-through security


Passive investment management

Buying a well-diversified portfolio to represent a broad-based market
index without attempting to search out mispriced securities.


Passive investment strategy

See: passive management.


Passive portfolio

A market index portfolio.


Second Pass Regression Image 3

Passive portfolio strategy

A strategy that involves minimal expectational input, and instead relies on
diversification to match the performance of some market index. A passive strategy assumes that the
marketplace will reflect all available information in the price paid for securities, and therefore, does not
attempt to find mispriced securities. Related: active portfolio strategy


Private-label pass-throughs

Related: Conventional pass-throughs.



Regression analysis

A statistical technique that can be used to estimate relationships between variables.


Regression analysis

Statistical analysis techniques that quantify the
relationship between two or more variables. The intent is quantitative
prediction or forecasting, particularly using a small population to forecast the
behavior of a large population.


Regression equation

An equation that describes the average relationship between a dependent variable and a
set of explanatory variables.


regression line

any 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


Regression toward the mean

The tendency for subsequent observations of a random variable to be closer to its mean.


Secondary issue

1) Procedure for selling blocks of seasoned issues of stocks.
2) More generally, sale of already issued stock.


Secondary market

The market where securities are traded after they are initially offered in the primary
market. Most trading is done in the secondary market. The New York stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets. Seasoned securities are traded in the
secondary market.


Secondary Market

The market where securities are exchanged between investors.
secondary market transactions have no effect on the issuing
company.


secondary market

Market in which already issued securities are traded among investors.


Secondary Market

New security issues are first sold directly to the public by the issuing firm or the government. After this initial sale, the owners of the securities can trade them among themselves or others; such activity is said to take place on the secondary market.



Secondary Market

In investment terminology, the market in which securities are traded after they have been issued by corporations. When a company sells a new issue of securities, the transaction is considered a "primary market transaction".


Simple linear regression

A regression analysis between only two variables, one dependent and the other explanatory.


simple regression

a statistical technique that uses only one independent variable to predict a dependent variable



 

 

 

 

 

 

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