Regression defined

Regression is a predictive analytics technique used to estimate a specific outcome (dependent variable) based on one or more explanatory factors (independent variables). Regression analysis is a way of using mathematics and statistics to determine which of several variables has an impact on an outcome and how big that impact is on the outcome.

Regression example

What is the relationship between investment risk taken and expected investment returns? The hypothesized relationship is as follows:

The higher the expected risk, the higher the amount of expected return.

Finance people traditionally use the Capital Asset Pricing Model (CAPM) to understand how much return there will be for each of risk that is generally estimated in a regression with this outcome variable and various independent variables that measure risk.