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1-15FRM(Financial Risk Manager)金融风险管理师
Linear Regression with One Regressor
一元线性回归
2-15FRM(Financial Risk Manager)金融风险管理师
Regression Analysis
A regression analysis has the goal of measuring how changes in one variable,
called a dependent or explained variable can be explained by changes in one or
more other variables called the independent or explanatory variables. The
regression analysis measures the relationship by estimating an equation (e.g.,
linear regression model). The parameters of the equation indicate the
relationship.
A scatter plot is a visual representation of the relationship between the
dependent variable and a given independent variable. It uses a standard two-
dimensional graph where the values of the dependent, or Y variable, are on the
vertical axis, and those of the independent, or X variable, are on the horizontal
axis.
3-15FRM(Financial Risk Manager)金融风险管理师
Population Regression Function
Lockup(yrs) Average Return
5 10 14 14 15 12 13
6 17 12 15 16 10 14
7 16 19 19 13 13 16
8 15 20 19 15 16 17
9 21 20 16 20 18 19
10 20 17 21 23 19 20
Fugure 1:Hedge Fund Data
Returns(%) per year
Figure 2:Return Over Lockup Period
4-15FRM(Financial Risk Manager)金融风险管理师
Population Regression Function
E (return | lockup period) = B0 + B1 × (lockup period)
Or more generally:
E (Yi | Xi) = B0 + B1 × (Xi)
Intercept Coefficient Slope Coefficient
0 1i i iY B B X
Error Term
5-15FRM(Financial Risk Manager)金融风险管理师
Sample Regression Function and Ordinary least squares (OLS)
0 1i i iY b b X e
e2
Y
X
e1 e3
e4
Yi b b X ei i i 0 1
Y b b Xi i 0 1
22
i 0 1 iminimize e Y -(b b X )i
6-15FRM(Financial Risk Manager)金融风险管理师
The Results of Ordinary least squares (OLS)
7-15FRM(Financial Risk Manager)金融风险管理师
201405真题讲解
8-15FRM(Financial Risk Manager)金融风险管理师
201405真题讲解
48. You are conducting an ordinary least squares regression of the returns on stocks Y
and X as Y=a + b × X +ε based on the past three year’s daily adjusted closing price
data. Prior to conducting the regression, you calculated the following information
from the data:
What is the slope of the resulting regression line?
A. 0.35
B. 0.45
C. 0.59
D. 0.77
Sample covariance 0.000181
Sample Variance of Stock X 0.000308
Sample Variance of Stock Y 0.000525
Sample mean return of stock X -0.03%
Sample mean return of Stock Y 0.03%
Notes 128页
0.000181
0.000.5877
0308
9-15FRM(Financial Risk Manager)金融风险管理师
Example
Consider two stocks, A and B. Assume their annual returns are
jointly normally distributed, the marginal distribution of each stock
has mean 2% and standard deviation 10%, and the correlation is
0.9. What is the expected annual return of stock A if the annual
return of stock B is 3%?
A. 2%
B. 2.9%
C. 4.7%
D. 1.1%
Answer: B
10-15FRM(Financial Risk Manager)金融风险管理师
Assumptions Underlying Linear Regression
Linear regression requires a number of assumptions. Most of the major assumptions pertain to she regression model’s residual term (i.e., error term). Three key assumptions are as follows:
1. The expected value of the error term, conditional on the independent variable, is zero ( )
2. All (X, Y) observations are independently and identically distributed (i.i.d.).
3. It is unlikely that large outliers will be observed in the data. Large outliers have the potential to create misleading regression results.
Additional assumptions include:
4. A linear relationship exists between the dependent and independent variable.
5. The model is correctly specified in that it includes the appropriate independent variable and does not omit variables.
6. The independent variable is uncorrelated with the error terms.
7. The variance of is constant for all Xi :
8. No serial correlation of the error terms exists
9. The error term is normally distributed
( | ) 0i iE X
i2Var( | )i iX
i i+j[i.e.,Corr(ε ,ε ) 0 for j=1,2,3...]
11-15FRM(Financial Risk Manager)金融风险管理师
The Coefficient of Determination (R2)
_
( )iY Y ESS
Y
b0
__
( )iY Y TSS
( )i iY Y SSR
__
Y
0 1i iY b b X
X
2 1ESS SSR
RTSS TSS
2 2 2R R
__ __2 2 2
Total sum of squares = explained sum of squares + sum of squared residuals
( ) ( ) ( )
i iY Y Y Y Y Y
TSS ESS
SSR
12-15FRM(Financial Risk Manager)金融风险管理师
The Standard Error of the Regression
The standard error of the regression (SER) measures the degree of variability
of the actual Y-values relative to the estimated Y-values from a regression
equation. The SER gauges the "fit" of the regression line. The smaller the
standard error, the better the fit.
The SER is the standard deviation of the error terms in the regression. As such,
SER is also referred to as the standard error of the residual, or the standard error
of estimate (SEE).
In some regressions, the relationship between the independent and dependent
variables is very strong (e.g., the relationship between 10-year Treasury bond
yields and mortgage rates). In other cases, the relationship is much weaker (e.g.,
the relationship between stock returns and inflation). SER will be low (relative to
total variability) if the relationship is very strong and high if the relationship is
weak.
13-15FRM(Financial Risk Manager)金融风险管理师
真题回顾
14-15FRM(Financial Risk Manager)金融风险管理师
真题解答
15-15FRM(Financial Risk Manager)金融风险管理师
结 束
恭祝大家
FRM学习愉快!
顺利通过考试!