Learning Quantitative Finance with R

Multivariate linear regression

In multiple linear regression, we try to explain the dependent variable in terms of more than one predictor variable. The multiple linear regression equation is given by the following formula:

Here are multiple linear regression parameters and can be obtained by minimizing the sum of squares, which is also known as the OLS method of estimation.

Let us an take an example where we have the dependent variable StockYPrice and we are trying to predict it in terms of independent variables StockX1Price, StockX2Price, StockX3Price ...