Charting with Trend Line

EssKayKay

Board Regular
Joined
Jan 5, 2003
Messages
87
I have a question on charting in Excel. I have a spreadsheet tracking investments over the past few years. I include a “Trend Line” in the chart via a polynomial regression. However, I’m confused on the “order” of the trend line. It allows values 2-6. It appears 2 is the most linear with varying degrees of alignment after that. Without getting too technical as I am no mathematician, what does the “order” mean and what order would you recommend? I am using Excel 2003.

Thanks,
Steve K.
 

shg

MrExcel MVP
Joined
May 7, 2008
Messages
21,722
Office Version
2010
Platform
Windows
The order of a polynomial is the highest (integer) power to which the variable is raised

1st order: y=ax
2nd order: y = ax^2 + b
3rd order: y=ax^3 + bx^2 +cx + d
...

I wouldn't recommend using any type of polynomial for modeling investment returns. It doesn't tell you anything useful.
 

shg

MrExcel MVP
Joined
May 7, 2008
Messages
21,722
Office Version
2010
Platform
Windows
A linear trendline would tell you whether things are generally headed in a good direction. An exponential trendline models constant year-over-year growth (or decline).
 

Forum statistics

Threads
1,085,580
Messages
5,384,560
Members
401,908
Latest member
shaanprakash

Some videos you may like

This Week's Hot Topics

Top