DEFINITION of 'Least Squares'
A statistical method used to determine a line of best fit by minimizing the sum of squares created by a mathematical function. A "square" is determined by squaring the distance between a data point and the regression line. The least squares approach limits the distance between a function and the data points that a function is trying to explain. It is used in regression analysis, often in nonlinear regression modeling in which a curve is fit into a set of data.
BREAKING DOWN 'Least Squares'
The least squares approach is a popular method for determining regression equations. Instead of trying to solve an equation exactly, mathematicians use the least squares to make a close approximation (referred to as a maximumlikelihood estimate). Modeling methods that are often used when fitting a function to a curve include the straight line method, polynomial method, logarithmic method and Gaussian method.

Residual Sum Of Squares  RSS
A statistical technique used to measure the amount of variance ... 
Sum Of Squares
A statistical technique used in regression analysis. The sum ... 
Stepwise Regression
The stepbystep iterative construction of a regression model ... 
Statistics
A type of mathematical analysis involving the use of quantified ... 
Regression
A statistical measure that attempts to determine the strength ... 
Autoregressive
A stochastic process used in statistical calculations in which ...

Investing Basics
Calculating Beta: Portfolio Math For The Average Investor
Beta is a useful tool for calculating risk, but the formulas provided online aren't specific to you. Learn how to make your own. 
Investing Basics
Regression Basics For Business Analysis
This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how. 
Options & Futures
Bettering Your Portfolio With Alpha And Beta
Increase your returns by creating the right balance of both these risk measures. 
Mutual Funds & ETFs
Analyzing Mutual Funds For Maximum Return
Using a few simple metrics will help you pick the right fund for your portfolio. 
Active Trading
The Linear Regression Of Time and Price
This investment strategy can help investors be successful by identifying price trends while eliminating human bias. 
Mutual Funds & ETFs
ETF Analysis: PowerShares DB Commodity Tracking
Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts. 
Mutual Funds & ETFs
ETF Analysis: PowerShares FTSE RAFI US 1000
Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks. 
Mutual Funds & ETFs
ETF Analysis: Vanguard IntermediateTerm Corp Bd
Learn about the Vanguard IntermediateTerm Corporate Bond ETF, and explore detailed analysis of the fund's characteristics, risks and historical statistics. 
Mutual Funds & ETFs
Top 3 Switzerland ETFs
Explore detailed analysis and information of the top three Swiss exchangetraded funds that offer exposure to the Swiss equities market. 
Economics
The Problem With Today’s Headline Economic Data
Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.

What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >> 
What are some of the more common types of regressions investors can use?
The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >> 
What types of assets lower portfolio variance?
Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >> 
When is it better to use systematic over simple random sampling?
Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >> 
What are some common financial sampling methods?
There are two areas in finance where sampling is very important: hypothesis testing and auditing. The type of sampling methods ... Read Full Answer >> 
How can I measure portfolio variance?
Portfolio variance measures the dispersion of returns of a portfolio. It is calculated using the standard deviation of each ... Read Full Answer >>