Regression

Regression is a statistical measurement used in finance, investing, and other disciplines that
attempts to determine the strength of the relationship between one dependent variable (usually
denoted by Y) and a series of other changing variables (known as independent variables).

Regression helps investment and financial managers to value assets and understand the
relationships between variables, such as commodity prices and the stocks of businesses dealing in
those commodities.

There are two basic types of regression: linear regression and multiple linear regression.
Regression takes a group of random variables, thought to be predicting Y, and tries to find a
mathematical relationship between them. This relationship is typically in the form of a straight line
(linear regression) that best approximates all the individual data points. In multiple regression, the
separate variables are differentiated by using numbers with subscripts

Correlation
Correlation is a statistical technique that can show whether and how strongly pairs of variables are
related. For example, height and weight are related; taller people tend to be heavier than shorter
people. The relationship isn't perfect. People of the same height vary in weight, and you can easily
think of two people you know where the shorter one is heavier than the taller one. Nonetheless,
the average weight of people 5'5'' is less than the average weight of people 5'6'', and their average
weight is less than that of people 5'7'', etc. Correlation can tell you just how much of the variation
in peoples' weights is related to their heights.

Although this correlation is fairly obvious your data may contain unsuspected correlations. You
may also suspect there are correlations, but don't know which are the strongest. An intelligent
correlation analysis can lead to a greater understanding of your data.

Reliability
Reliability in and psychometrics is the overall consistency of a measure. A measure is said to have
a high reliability if it produces similar results under consistent conditions. "It is the characteristic
of a set of test scores that relates to the amount of random error from the measurement process that
might be embedded in the scores. Scores that are highly reliable are accurate, reproducible, and
consistent from one testing occasion to another. That is, if the testing process were repeated with
a group of test takers, essentially the same results would be obtained. Various kinds of reliability
coefficients, with values ranging between 0.00 (much error) and 1.00 (no error), are usually used
to indicate the amount of error in the scores." For example, measurements of people's height and
weight are often extremely reliable.

Validity
Validity refers to how accurately a method measures what it is intended to measure. If research
has high validity, that means it produces results that correspond to real properties, characteristics,
and variations in the physical or social world.

High reliability is one indicator that a measurement is valid. If a method is not reliable, it probably
isn’t valid.

Reliability and validity are concepts used to evaluate the quality of research. They indicate how
well a method, technique or test measures something. Reliability is about the consistency of a
measure, and validity is about the accuracy of a measure.

It’s important to consider reliability and validity when you are creating your research design,
planning your methods, and writing up your results, especially in quantitative research.

Reliability vs validity

Reliability Validity

What does it The extent to which the results can be The extent to which the results really
tell you? reproduced when the research is measure what they are supposed to
repeated under the same conditions. measure.

How is it By checking the consistency of results By checking how well the results
assessed? across time, across different observers, correspond to established theories and
and across parts of the test itself. other measures of the same concept.

How do they A reliable measurement is not always A valid measurement is generally reliable:
relate? valid: the results might be if a test produces accurate results, they
reproducible, but they’re not should be reproducible.
necessarily correct.