Why Logistic Regression Analyses Are More Reliable Than Multiple Regression Analyses

Jianing Fang
(Marist College, Poughkeepsie, New York, USA)

Abstract: Medical scientists have been using logistic regression analyses for their empirical research for quite some time. However, a majority of the previous accounting or finance-related empirical studies were based entirely on results from certain forms of multivariate regressions analysis. The reliability of these findings is subject to question. By definition, all forms of multiple regressions rely critically on some assumptions of the quality of the test data. One of the major problems is that most of the financial data often violate some, and in many cases, all of these assumptions. This paper will discuss the advantages and disadvantages of both the multiple regression analyses and the logistic regression analyses for empirical research. The main goal of this article is to promote the utilization of logistic regressions in addition to any applicable multivariate analysis to provide the much needed verification and reliability of empirical study results.

Key words: multiple regression; logistic regression; efficient market hypothesis

JEL code: C35