A simple linear trend model is a foundational statistical technique that fits a straight line through historical data points—such as stock prices, revenues, or earnings—to identify the underlying direction and rate of change of a variable over time. Using ordinary least squares regression, the model estimates the best-fit line that minimises the total squared deviation from actual data points. While easy to interpret and apply, the model has significant limitations in financial markets due to non-linearity, cyclicality, and regime shifts. It is best used as a starting point for exploratory analysis rather than as a standalone forecasting tool.
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