Financial Terms Simple linear regression

# Definition of Simple linear regression

## Simple linear regression

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

# Related Terms:

## First-pass regression

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

## 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 programming

Technique for finding the maximum value of some equation subject to stated linear constraints.

## linear programming

a method of mathematical programming used to solve a problem that involves an objective function and multiple limiting factors or constraints long-term variable cost a cost that was traditionally viewed as a fixed cost

## Linear regression

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

## Log-linear least-squares method

A statistical technique for fitting a curve to a set of data points. One of the
variables is transformed by taking its logarithm, and then a straight line is fitted to the transformed set of data
points.

## 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

## 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.

## Savings Incentive Match Plan for Employees (SIMPLE)

An IRA set up by an employer with no other retirement plan and employing fewer than 100 employees,
into which they can contribute up to \$9,000 per year (as of 2004).

## 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.

## Simple compound growth method

A method of calculating the growth rate by relating the terminal value to
the initial value and assuming a constant percentage annual rate of growth between these two values.

## Simple interest

Interest calculated only on the initial investment. Related:compound interest.

## Simple Interest

Interest paid only on the principal; calculated by multiplying the
interest rate by the principal

## simple interest

a method of determining interest in which interest is earned only on the original investment (or principal) amount

## simple interest

Interest earned only on the original investment; no interest is earned on interest.

## Simple linear trend model

An extrapolative statistical model that asserts that earnings have a base level and
grow at a constant amount each period.

## Simple moving average

The mean, calculated at any time over a past period of fixed length.

## Simple prospect

An investment opportunity where a certain initial wealth is placed at risk and only two
outcomes are possible.

## simple regression

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

## simplex method

an iterative (sequential) algorithm used to solve multivariable, multiconstraint linear programming problems