- CFA Exams
- 2025 Level II
- Topic 1. Quantitative Methods
- Learning Module 2. Evaluating Regression Model Fit and Interpreting Model Results
- Subject 3. The Use of Multiple Regression for Forecasting
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Subject 3. The Use of Multiple Regression for Forecasting PDF Download
Predicting the value of the dependent variable using an estimated multiple regression model is similar to that in simple regression. First, sum, for each independent variable, the estimated slope coefficient multiplied by the assumed value of that variable, and then add the estimated intercept coefficient.
Example
A multiple regression analysis yields the equation y-hatt = -3.8 + 2.34 X1t + 7.52 X2t. If
- The value of the X1t independent variable is 6, and
- The value of the X2t independent variable is 2.
What is the predicted value of the dependent variable?
Answer: The predicted value of the dependent variable is -3.8 + 2.34 x 6 + 7.52 x 2 = -3.8 + 14.04 + 15.04 = 25.28.
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