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Regression Discretion

Sept. 16, 2014

Regression analysis is a helpful tool which may be used to predict a continuous dependent variable (ex:  asset values) from one or more independent variables.  In our analysis, we use regression models as one component in our asset forecasting process in addition to an income based valuation and input from our sale and purchase desk.  When conducting regression analysis, the objective is to identify a strong correlation between a dependent and independent variable using historical data.  Using a scale of 0.0 – 1.0, a strong, positive correlation is typically defined as being above 0.7.  If the analysis indicates a strong correlation, the corresponding regression equation may be used to help predict the value of the dependent variable; however, it may be prudent to amalgamate regression analysis with one or more forecasting processes to determine a final outcome.   

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