What are some common regression techniques used in finance?

What are some common regression techniques used in finance?

Common regression techniques in finance include linear regression, logistic regression, and polynomial regression.

Can you explain how linear regression is applied in financial modeling?

Linear regression is used to model the relationship between a dependent variable, like stock prices, and one or more independent variables, such as economic indicators.

What are the limitations of using regression analysis in finance?

Limitations include assumptions of linearity, sensitivity to outliers, and the potential for overfitting with complex models.

How does logistic regression differ from linear regression?

Logistic regression is used for binary outcomes, predicting probabilities, while linear regression predicts continuous values.

Can regression techniques be used for risk assessment?

Yes, regression techniques can help assess risk by modeling the relationship between risk factors and financial outcomes.