Multiple Linear Regression - MLR


DEFINITION of 'Multiple Linear Regression - MLR'

A statistical technique that uses several explanatory variables to predict the outcome of a response variable. The goal of multiple linear regression (MLR) is to model the relationship between the explanatory and response variables.

The model for MLR, given n observations, is:

yi = B0 + B1xi1 + B2xi2 + ... + Bpxip + Ei where i = 1,2, ..., n

BREAKING DOWN 'Multiple Linear Regression - MLR'

MLR takes a group of random variables and tries to find a mathematical relationship between them. The model creates a relationship in the form of a straight line (linear) that best approximates all the individual data points.

MLR is often used to determine how many specific factors such as the price of a commodity, interest rates, and particular industries or sectors, influence the price movement of an asset. For example, the current price of oil, lending rates, and the price movement of oil futures, can all have an effect on the price of an oil company's stock price. MLR could be used to model the impact that each of these variables has on stock's price.

  1. Control

    1. The use of power to influence an outcome. For example, working ...
  2. Nonlinearity

    A relationship which cannot be explained as a linear combination ...
  3. Stepwise Regression

    The step-by-step iterative construction of a regression model ...
  4. Growth Curve

    A graphical representation of how a particular quantity increases ...
  5. Statistical Significance

    A result that is not likely to occur randomly, but rather is ...
  6. Beta

    Beta is a measure of the volatility, or systematic risk, of a ...
Related Articles
  1. 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.
  2. Investing Basics

    What Investors Should Know About Interest Rates

    Understanding interest rates helps you answer the fundamental question of where to put your money.
  3. Active Trading

    Modern Portfolio Theory: Why It's Still Hip

    See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
  4. 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.
  5. Professionals

    Style Matters In Financial Modeling

    If you're looking to get a job as an analyst, you'll need to know how to work it.
  6. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

    Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability.
  7. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  8. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  9. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  10. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  1. 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 >>
  2. How can I run linear regressions in MATLAB?

    MATLAB is a powerful computing environment and programming language that is commonly used in statistics and finance. To run ... Read Full Answer >>
  3. What is the difference between linear regression and multiple regression?

    In statistics, linear regression models the relationship between a dependent variable and one or more explanatory variables ... Read Full Answer >>
  4. Is finance an art or a science?

    The short answer to this question is "both". Finance, as a field of study and an area of business, definitely has strong ... Read Full Answer >>
  5. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  6. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!