How can we predict uncertain outcomes? We could study the relations between the uncertain variable to be predicted and some known variable. Suppose, for example, that we had to predict the change in profits for the airline industry. We might expect to find a relation between GNP growth in the current period and airline profits in the subsequent period, because economic growth usually foreshadows business travel as well as personal travel. We can quantify this relation through a technique known as regression analysis. Regression analysis can be traced to Sir Francis Galton (1822-1911), an English scientist and anthropologist who was interested in determining whether or not a son’s height corresponded to his father’s height. To answer this question, Galton measured a sample of fathers and computed their average height. He then measured their sons and computed their average height. He found that fathers of aboveaverage height had sons whose heights tended to exceed the average. Galton termed this phenomenon
“regression toward the mean.”