Least Squares

Filed Under »
Dictionary Says

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.
Investopedia Says

Investopedia explains '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 maximum-likelihood 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.

Articles Of Interest

  1.

    Regression Basics For Business Analysis

    This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how.

  2. Bettering Your Portfolio With Alpha And Beta

    Increase your returns by creating the right balance of both these risk measures.

  3. Analyzing Mutual Funds For Maximum Return

    Using a few simple metrics will help you pick the right fund for your portfolio.

  4. 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.

  5. The Linear Regression Of Time and Price

    This investment strategy can help investors be successful by identifying price trends while eliminating human bias.

  6. Breaking Down The Geometric Mean

    Understanding portfolio performance, whether for a self-managed, discretionary portfolio or a non-discretionary portfolio, is vital to determining whether the portfolio strategy is working or ...

  7. Tracking Volatility: How The VIX Is Calculated

    When market volatility spikes or stalls, newspapers, websites, bloggers and television commentators all refer to the VIX®. Formally known as the CBOE Volatility Index, the VIX is a benchmark ...

  8. Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.

  9. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  10. Calculating The Means

    Learn more about the different ways you can calculate your portfolio's average return.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...

  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center