Applications of Simple Linear Regression in Finance

Free CFA Level I lesson in Quantitative Methods. 12 min read, ~1,824 words.

OLS picks the slope and intercept that minimize the sum of squared residuals. Slope; intercept. Four assumptions: linearity, independence (no autocorrelation), homoskedasticity, normally distributed errors. Each has a residual-plot diagnostic.; F = MSR/MSE; t-stat on slope =. In simple regression,. SEE is the typical residual measured in the units of...