Understanding Linear Regression

What is Regression Analysis, Linear Regression, and the assumptions of Lin Reg.

Required Readings

• Basic Data Wrangling

• Knowledge on Normal Distribution

• How to work with libraries

Table of Contents:

1. Where You Will Use this?

2. What is Regression?

3. What is Linear Regression (Multiple)?

4. The Assumptions of Linear Regression

5. Implementing Linear Regression

6. Last Tidbits of info

1 - Where You Will Use this?

You will use linear regression on almost a daily basis at the workplace. Linear Regression is helpful to find the connection between several x values, and 1 specific y value. Linear regression is also helpful because it will tell you how strong the relationship is between just 2 datasets.

It can also be used to figure out which factors (x columns) are basically redundant & can be kicked out for some further analysis.

For Quants: Most Portfolio Managers prefer linear regression over the other types of regression analysis because it is super easy to understand, and it meets a lot of the compliance requirements that firms are required to follow.