Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo
Principles of Finance

Key Terms

Principles of FinanceKey Terms
best-fit linear regression model
an equation of the form y^=a+bxy^=a+bx that provides the best-fit straight line to the (x, y) data points
beta
the measure of the volatility of a stock as compared to a benchmark such as the S&P 500 index
correlation
the measure of association between two numeric variables
correlation coefficient
a measure of the strength and direction of the linear relationship between two variables
linear correlation
a measure of the association between two variables that exhibit an approximate straight-line fit when plotted on a scatter plot
method of least squares
a mathematical method to generate a linear equation that is the “best fit” to the points on the scatter plot in the sense that the line minimizes the differences between the predicted values and observed values for y
prediction
a forecast for the dependent variable based on a specific value of the independent variable generated using the linear model
residual
the difference between an observed y-value and the predicted y-value obtained from the linear regression equation
scatter plot (scatter diagram)
graphical display that shows values of the independent variable plotted on the x-axis and values of the dependent variable plotted on the y-axis
PreviousNext
Order a print copy
Citation/Attribution

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-finance/pages/1-why-it-matters
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-finance/pages/1-why-it-matters
Citation information

© Jan 8, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.