What is Linear Regression?

What is Linear Regression?

Abdulla Javeri

30 years: Financial markets trader

This video is a continuation in the series where Abdulla examines whether movements in one asset are somehow related to movements in another asset. The subject of this video is linear regression, otherwise known as simple linear regression or least squares regression.

This video is a continuation in the series where Abdulla examines whether movements in one asset are somehow related to movements in another asset. The subject of this video is linear regression, otherwise known as simple linear regression or least squares regression.

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What is Linear Regression?

4 mins 55 secs

Overview

Linear regression, also known as simple linear regression or least squares regression, attempts to quantify the expected return for one asset given the return for another asset. The regression line defines the relationship between the expected return for a particular asset (defined as the dependent variable) and another asset (defined as the independent variable). The line passes through the average of both, with a slope that minimises residual errors.

Key learning objectives:

  • What is linear regression?

  • How do you construct a regression line?

  • How do you define the slope of the line?

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Summary
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Expert
Abdulla Javeri

Abdulla Javeri

Abdulla’s career in the financial markets started in 1990 when he entered the trading floor of the London International Financial Futures Exchange, LIFFE, and qualified as a pit trader in equity and equity index options. In 1996, Abdulla became a trainer for regulatory qualifications and then for non-exam courses, primarily covering all major financial products.

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