Groundlearn / Glossary / Linear regression
Linear regression (OLS)
Also called ordinary least squares, OLS. A CFA and FRM term, defined in plain English with the distinction examiners test.
What it means
Fitting a straight line through data by minimising the sum of squared residuals, to explain a dependent variable by one or more independent variables.
Where it appears in the syllabus
- Quantitative MethodsCFA Level I · exam weight 11–14% · Returns and benchmarks, time value, distributions, portfolio maths, regression.
- Quantitative MethodsCFA Level II · exam weight 5–10% · Multiple regression, misspecification, time series, machine learning.
- Quantitative AnalysisFRM Part I · exam weight 20% · Probability, hypothesis testing, regression, time series, volatility, simulation.
Related terms
- Coefficient of determinationThe fraction of the dependent variable’s variation explained by the regression.
- Arithmetic meanThe sum of the observations divided by their number.
- BootstrapResampling the observed data with replacement to estimate the sampling distribution of a statistic, without assuming a…
- Central limit theoremFor a large enough sample, the distribution of the sample mean approaches normal regardless of the shape of the…
- Confidence intervalA range that will contain the true parameter in a stated proportion of repeated samples.
- Continuous compoundingCompounding over infinitely small intervals.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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