How Good Is My Predictive Model — Regression Analysis

Forecasting is an important concept in econometric and data science. It is also widely used in artificial intelligence and risk management by quantitative analysts, statistical modellers and technologists. Additionally, a large number of studies are carried out to understand and predict variables and their future movements.

Please read disclaimer before proceeding.

Predictive analysis is a black art. There are many right answers.

What will we cover in this article?

This article focuses on the concept of regression analysis. In particular, I have divided the article into 6 parts.

1. Explanation Of Regression Analysis
2. 3 Steps Of Regression Analysis
3. Understanding Of Residuals
4. Ordinary Least Square Explanation
5. Overview Of Model Criterion

Let’s Start

One of the most famous methodologies to forecast a variable’s behaviour is to use regression analysis. This technique requires formulating a mathematical equation/model that can be used to give us an estimated value which is as close as possible to the actual observed value.