Multiple Linear Regression - MLR

AAA

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

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Regression

    A statistical measure that attempts to determine the strength ...
RELATED FAQS
  1. 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 >>
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. Options & Futures

    Avoid Future Shock By Protecting Your Portfolio With Futures

    Worried about protecting your portfolio of diversified stocks and assets? Using futures with correct strategies can help.
  7. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  8. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.
  9. Brokers

    OptionsXpress Vs. OptionsHouse: Which One To Pick?

    OptionsXpress and OptionsBroker -- each offers a price mix and set of services suitable for certain investors based on their trade approach and priorities.
  10. Options & Futures

    The Future Is Now: All About Futures ETFs

    A new security class - futures ETFs - is gaining popularity. We tell you how futures ETFs work and offer tips.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center