- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 10. Simple Linear Regression
- Subject 3. Analysis of Variance
CFA Practice Question
An analyst is reviewing the following data produced after a regression analysis:
Regression Sum of the Squares (RSS) = 437
Sample data included 25 observations.
B. 91.8% of the variation in the dependent variable may be explained by the regression model.
C. 95.8% of the variation in the dependent variable may be explained by the regression model.
Total Sum of Squares (TSS) = 476
Sum of the Squares of the Errors (SSE) = 39
Regression Sum of the Squares (RSS) = 437
Sample data included 25 observations.
Using the analysis of variance (ANOVA) approach, which of the following statements would be true?
A. 91.1% of the variation in the dependent variable may be explained by the regression model.
B. 91.8% of the variation in the dependent variable may be explained by the regression model.
C. 95.8% of the variation in the dependent variable may be explained by the regression model.
Correct Answer: B
Coefficient of Determination: R2yx = RSS/TSS or 1 - SSE/TSS = 437/476 or 1 - 39/476 = 0.918.
91.8% of the variation in the dependent variable may be explained by the regression model.
User Contributed Comments 1
| User | Comment |
|---|---|
| quanttrader | RSS = explained variation SSE = unexplained variation |