CH2. Simple Linear Regression 2023
CH2. Simple Linear Regression 2023
Analysis
What is a regression model?
• Here you will be working with the first one on the list: LS
– Least Squares (to mean OLS).
• Suppose you want to estimate a linear regression model
in which the dependent variable is y and the
independent variables are x1, x2 and x3.
y c x1 x2 x3
• When you click on OK, you will get the fitted model
alongside model fit statistics.
In our case, we type:
asset_return c market_return
When you click on OK, you will get the fitted linear
regression model (or CAPM) with several model-fit
statistics.
For now, let us consider the results displayed in the
upper panel of the output.
Illustration