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Regression equation is given as y= a + b1*x1 +b2*x2 - b3*x3 where "y" is dependent variable and "a","b1","b2","b3" are all constants.As value of variables "x1" and "x2" increase so will value of "y" and as value of "x3" will increase value of "y" will decrease."a" is constant such that irrespective of other factors value of "y" will be atleast "a".
Now as the ground is ready we will move to most interesting application of Regression Equation.It explains "rise by night" Stock Price:-
Now as the ground is ready we will move to most interesting application of Regression Equation.It explains "rise by night" Stock Price:-
STEP 1-Operator(punter)makes stock known to common people via his nexus with brokers which is known as "TIP".This is "x1" of our equation and weight assigned to it is low which is "b1".
STEP 2-Some good technical and fundamental analysts then use all kind of technical and fundamental jargons on reputed news channels and make people realize that this very stock is future of market!!! This is "x2" of our equation and weight assigned to it is high which is "b2".This is because after this interview of analyst this stock becomes discussion topic of "mother and grandmothers" also!!Then slowly euphoria starts buliding and even "Paan waala" buys that stock and its price soars!This is time when operator,analysts offload their holdings in stock and common man makes "wise" decision of buying it!!
STEP 3-The constant "a" is symbolized by news channel editors who continuously "bombard" its "audience" with that "promising" stock and make it rise.
Now owing to all these Efforts of operators,analyst and editors the value of our dependent variable i.e "y" which is price of stock soars!!
And now coming to lag variable i.e "x3".This symbolizes interest of common man.As the stock flows from operator and analysts to common man, its price starts to plunge!!Thus as value of "x3" increase the value of "y" i.e price of stock starts to plunge!!
So the common wisdom is to exit the stock when it is with all people under the sun.
Live examples of Regression equation are stocks like Akruti city,PSTL and many more gone and many more yet to come!!
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