DEFINITION of 'Nonlinearity'
A relationship which cannot be explained as a linear combination of its variable inputs. Nonlinearity is a common issue when examining causeeffect relations. Such instances require complex modeling and hypothesis to offer explanations to nonlinear events. Nonlinearity without explanation can lead to random, unforecasted outcomes such as chaos.
INVESTOPEDIA EXPLAINS 'Nonlinearity'
Nonlinear regression is a common form of regression analysis used in the financial industry to model nonlinear data against independent variables in an attempt to explain their relationship. Although the models parameters are nonlinear in nature, nonlinear regression can fit data using methods of successive approximations to offer explanatory outputs.

Statistics
A type of mathematical analysis involving the use of quantified ... 
Multiple Linear Regression  MLR
A statistical technique that uses several explanatory variables ... 
Linear Relationship
A statistical term used to describe the relationship between ... 
Regression
A statistical measure that attempts to determine the strength ... 
Statistically Significant
The likelihood that a result or relationship is caused by something ... 
Altman ZScore
The output of a creditstrength test that gauges a publicly traded ...

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 produce negative portfolio variance?
Assets that have a negative correlation with each other produce negative portfolio variance. Variance is one measure of the ... 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 >>

Home & Auto
Insure Your Future With A Career As An Actuary
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Fundamental Analysis
Financial Markets: Random, Cyclical Or Both?
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Trading Strategies
What Your Trading Charts Aren't Telling You
You may be missing some key statistics when following charts in the market. 
Economics
Explaining the Liquidity Coverage Ratio
The liquidity coverage ratio requires banks and other financial institutions to hold enough cash and liquid assets on hand to weather market stress. 
Fundamental Analysis
Calculating Valuation
Valuation is the process of determining what an asset is worth. 
Economics
Will the Selloff in China Hurt the Global Economy?
Though China is the world’s second largest economy, its volatility in the stock market is unlikely to have an impact on the global or Chinese economy. 
Fundamental Analysis
Understanding Qualitative Analysis
Qualitative analysis is a general term describing the nonmathematical scrutiny used by investors and managers to make investment and business decisions. 
Economics
Signs The U.S. Recovery Is Solid
Many market observers lately have been making some pretty pessimistic evaluations of the U.S. economy, declaring that it’s stagnating and soft. 
Fundamental Analysis
Explaining the Monte Carlo Simulation
Monte Carlo simulation is an analysis done by running a number of different variables through a model in order to determine the different outcomes. 
Fundamental Analysis
Explaining the Empirical Rule
The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.