Regression analysis is used for forecasting and prediction in finance. It is used to understand the relationship between independent variable and dependent variable.
For example, As the number of teachers increases the students pass percentage is increased in a college. In this case the teacher is the independent variable and the passing student is the dependent variable. To understand how the increase in number of teachers increases the number of passing student we need to do regression analysis on the historical data of students and teacher. Using regression analysis we will try to develop an equation in the form of
Y= mX + C
Y—Dependent Variable (Passing Students)
X—Independent Variable (No. Of Teachers)
Using this equation we can predict the future by putting different value of X and accordingly obtain the value of Y.