DEFINITION of 'Multivariate Model'

A popular statistical tool that uses multiple variables to forecast possible investment outcomes. Multivariate models predict outcomes of situations that are affected by more than one variable, and are widely used in the financial world.

BREAKING DOWN 'Multivariate Model'

Analysts use them to estimate cash flows and evaluate new product ideas. Portfolio managers and financial advisors use them to predict the impact of individual investments on total portfolio returns. In the insurance industry, multivariate models help insurers estimate risk. Analysts also use this type of model to value stock options.

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