- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 9. Parametric and Non-Parametric Tests of Independence
- Subject 1. Tests Concerning Correlation
CFA Practice Question
For a given line of best fit, you compute that r = 0.5204 using n = 9 data points, and the critical value is 2.3646. Can the line be used for prediction?
Correct Answer: No
The test statistic is calculated to be 1.6124, smaller than the critical value. We fail to reject the null hypothesis of correlation = 0.
There are two methods of making the decision. The two methods are equivalent and give the same result. The textbook uses a table of critical values. You can use the p-value too.
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