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Reading 10 Simple Linear Regression

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18 views3 pages

Reading 10 Simple Linear Regression

Uploaded by

Haider Shahbaz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CFA

SIMPLE & LINEAR


REGRESSION
10

1. The estimated slope coefficient in a simple linear regression is:


(A) the predicted value of the dependent variable, given the actual value of the
independent variable.
(B) the change in the independent variable, given a one-unit change in the dependent
variable.
(C) the ratio of the covariance of the regression variables to the variance of the
independent variable.

2. Given the relationship: Y = 2.83 + 1.5X


What is the predicted value of the dependent variable when the value of the
independent variable equals 2?
(A) 2.83.
(B) –0.55.
(C) 5.83.

3. When there is a linear relationship between an independent variable and the relative
change in the dependent variable, the most appropriate model for a simple regression is:
(A) the log-log model.
(B) the log-lin model.
(C) the lin-log model

4. Consider the following analysis of variance (ANOVA) table:


Mean sum of
Source Sum of squares Degrees of freedom
squares
Regression 556 1 556
Error 679 50 13.5
Total 1,235 51
The R2 for this regression is closest to
(A) 0.45.
(B) 0.55.
(C) 0.82.

Quantitative Method 1 Simple & Linear Regression


CFA

5. The coefficient of determination for a linear regression is best described as the:


(A) percentage of the variation in the dependent variable explained by the variation of
the independent variable.
(B) percentage of the variation in the independent variable explained by the variation
of the dependent variable.
(C) covariance of the independent and dependent variables.

6. A simple linear regression is said to exhibit heteroskedasticity if its residual term:


(A) does not have a constant variance.
(B) is nonnormally distributed.
(C) is not independently distributed

7. To determine a confidence interval around the predicted value from a simple linear
regression, the appropriate degrees of freedom are:
(A) n – 1.
(B) n.
(C) n – 2.

8. Which of the following is least likely an assumption of linear regression?


(A) The variance of the error terms each period remains the same.
(B) The error terms from a regression are positively correlated.
(C) Values of the independent variable are not correlated with the error term.

9. A simple linear regression is a model of the relationship between:


(A) one dependent variable and one or more independent variables.
(B) one dependent variable and one independent variable.
(C) one or more dependent variables and one or more independent variables.

10. Consider the following analysis of variance (ANOVA) table


Source Sum of squares Degrees of freedom Mean sum of squares
Regression 550 1 550.00
Error 750 38 19.737
Total 1,300 39
The F-statistic for the test of the fit of the model is closest to:
(A) 0.42.
(B) 0.97.
(C) 27.87.

Quantitative Method 2 Simple & Linear Regression


CFA

11. To account for logarithmic variables, functional forms of simple linear regressions are
available if:
(A) the independent variable is logarithmic, but not if the dependent variable is
logarithmic.
(B) either the dependent or independent variable is logarithmic, but not both.
(C) either or both of the dependent and independent variables are logarithmic.

12. A simple linear regression is performed to quantify the relationship between the return
on the common stocks of medium-sized companies (mid-caps) and the return on the
S&P 500 index, using the monthly return on mid-cap stocks as the dependent variable
and the monthly return on the S&P 500 as the independent variable. The results of the
regression are shown below:
Standard Error of
Coefficient t-Value
Coefficient
Intercept 1.71 2.950 0.58
S&P 500 1.52 0.130 11.69
Coefficient of determination = 0.599

The strength of the relationship, as measured by the correlation coefficient, between the
on mid-cap stocks and the return on the S&P 500 for the period under study was
(A) 0.130.
(B) 0.774.
(C) 0.599.

13. In a simple regression model, the least squares criterion is to minimize the sum of
squared differences between:
(A) the intercept term and the residual term.
(B) the predicted and actual values of the dependent variable.
(C) the estimated and actual slope coefficient.

Quantitative Method 3 Simple & Linear Regression

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