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Characteristic line

Characteristic Line is the technical term for the best fit or regression line that comes out of regression analysis. It is the line that represents the estimated linear relationship between the dependent variable (the thing we want to explain) and the independent variable (the thing we use to explain it).

Example: Suppose we want to explain the return on IBM by saying that it depends on the Dow Jones Industrial Index. This relationship between IBM and the Dow can be put into a linear equation like this:

RIBM = a + bRDow Jones
The straight line with intercept a and slope b is the characteristic equation.

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