DEFINITION of 'Stepwise Regression'

The step-by-step iterative construction of a regression model that involves automatic selection of independent variables. Stepwise regression can be achieved either by trying out one independent variable at a time and including it in the regression model if it is statistically significant, or by including all potential independent variables in the model and eliminating those that are not statistically significant, or by a combination of both methods.

BREAKING DOWN 'Stepwise Regression'

Stepwise regression has a number of drawbacks, according to some statisticians. These include incorrect results, an inherent bias in the process itself and the necessity for significant computing power to develop complex regression models through iteration.

RELATED TERMS
  1. Regression

    A statistical measure that attempts to determine the strength ...
  2. Nonlinear Regression

    A form of regression analysis in which data is fit to a model ...
  3. Error Term

    A variable in a statistical and/or mathematical model, which ...
  4. Hedonic Regression

    A method used to determine the value of a good or service by ...
  5. Variance Inflation Factor

    A measure of the amount of multicollinearity in a set of multiple ...
  6. Residual Sum Of Squares - RSS

    A statistical technique used to measure the amount of variance ...
Related Articles
  1. Insights

    Understanding Regression

    Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.
  2. Investing

    Regression Basics For Business Analysis

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

    What's a Regressive Tax?

    A regressive tax is a levy in a tax system where the tax rate does not change based on the level of income.
  4. Trading

    When Is A Bull Market Not A Bull Market?

    During some bull or bear moves in the stock markets, investors will be going with the trend, but day traders may find they cannot.
  5. Trading

    The Linear Regression Of Time and Price

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

    Calculating (Small) Company Credit Risk

    Determining creditworthiness of smaller and medium-sized corporations isn't as easy as for larger companies, but these tips can help.
  7. Taxes

    Comparing Regressive, Proportional and Progressive Taxes

    Learn about the basic differences between three common tax systems.
  8. Investing

    Understanding Statistics

    Statistics provide the means to analyze data and then summarize it into a numerical form.
  9. Investing

    What's a Sensitivity Analysis?

    Sensitivity analysis is used in financial modeling to determine how one variable (the target variable) may be affected by changes in another variable (the input variable).
  10. Small Business

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
RELATED FAQS
  1. What are some of the more common types of regressions investors can use?

    Learn about the most common types of regressions investors use to model asset prices including linear regressions and multiple ... Read Answer >>
  2. What is the difference between linear regression and multiple regression?

    Learn the difference between linear regression and multiple regression and how multiple regression encompasses not only linear ... Read Answer >>
  3. How can I run linear and multiple regressions in Excel?

    Learn the steps involved in running a regression in Microsoft Excel: preparations, uploading data and using the regression ... Read Answer >>
  4. How can I use a regression to see the correlation between prices and interest rates?

    Learn how to use linear regression to calculate the correlation between stock prices and interest rates by taking the square ... Read Answer >>
  5. How can I run linear regressions in MATLAB?

    Learn how to run linear regressions in MATLAB by loading data, specifying dependent and independent variables and using the ... Read Answer >>
  6. In what types of economies are regressive taxes common?

    Understand the three main taxation systems, regressive, proportionate and progressive, and learn where regressive tax systems ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center