Question

Regression analysis is prediction analysis. PredictWallStreet is one of the leading online sources of real-time investor sentiment and daily trading insights. Choose a stock in the industrial average and predict its performance for the week. At the end of the week, tell us how you did on your prediction. Tell us why you chose the stock you chose and why you made a certain prediction. What went into your decision ?

Answer 1

Example:

In finance, regression analysis is used to calculate the Beta (volatility of returns relative to the overall market) for a stock. It can be done in Excel using the Slope function. The following types of analysis are usually performed for a selected stock:

• Beta and CAPM:

The following stock was chosen to plot its Beta chart as follows:

• Forecasting Revenues and Expenses:

When forecasting financial statements for a company, it may be useful to do a multiple regression analysis to determine how changes in certain assumptions or drivers of the business will impact revenue or expenses in the future. For example, there may be a very high correlation between the number of salespeople employed by a company, the number of stores they operate, and the revenue the business generates, as shown below:

The above example shows how to use the Beta plot and Forecast function in Excel to forecast a stock's success, based on its ad revenue generation.

Hope this helps!