Dynamic Regression

Posted in Finance, Accounting and Economics Terms, Total Reads: 1160
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Definition: Dynamic Regression

Regression is a technique used to analyze variables and their relationship. It is used for both planning as well as forecasting.

But as there is a substantial time period between forecasting and implementing changes by seeing the regression model, the findings of the regression model become outdated.

Hence dynamic regression model is where dynamic responses are added to account for time adjusted responses.

Example:

Yt = α + 0Xt +1Xt1 +Yt1 + €t


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