ABSTRACT
Simple regression
involves one independent factor, such as inflation or interest rate differentials, in forecasting currency rate, whereas
multiple regression
involves two or more explanatory variables, e.g., inflation, interest rate differentials, and economic growth together. An example of simple regression is: A global fund’s return is a function of the return on a world market portfolio, i.e.,
r
=
a
+
br
, where
b
=
beta, a measure of uncontrollable risk.
