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FINANCIAL MARKET COURSES

Correlation & Regression Analysis

In everyday life we can find plenty of examples of relationships between variables, whether physical, social, economic, political, or otherwise. For example, there exists a clear and direct relationship between the height of a person’s body and his weight. Also, there is a relationship between income and consumption, both for an individual and for a country.

 

Two simple and meaningful ways to measure the relationships among variables are the statistical concepts of correlation and regression analysis. This course describes these techniques, and provides some examples of how they are applied in the financial world

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe the concept of correlation and compute the correlation coefficient between two variables

    Use regression analysis to model the relationship between variables

  • COURSE OUTLINE

    Topic 1: Correlation

    Definition of Correlation

    Some Fundamental Concepts

    Pearson Correlation Coefficient

    Types of Correlation

    Interpretation of the Size of the Correlation Coefficient

    Computing Correlation Manually

    Computing Correlation – Example

    Correlation Coefficient of a sample

    Correlation Coefficient of a sample – Example

    Correlation & Causality

    Topic 2: Regression Analysis

    Definition of Regression Analysis

    Purpose of Regression Analysis

    Regression Analysis

    Two- Variable Linear Regression

    Ordinary Least Squares (OLS) Regression Analysis

    Derivation of Least Squares Estimators

    Computing the Least Squares Estimators Manually – Example

    Generalization of Ordinary Least Squares

    Assumptions of Progression Analysis

    Properties of the OLS Estimators

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 minutes

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