- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Evaluating Regression Model Fit and Interpreting Model Results
- Subject 4. Confidence Intervals for Regression Coefficients in a Multiple Regression
CFA Practice Question
You have obtained the following sample regression equation from 25 samples:
y-hatt = 2.304 + 3.412 Xt1 - 4.657 X2t
The estimated standard errors are 0.87, 1.23 and 1.78 for b0, b1 and b2, respectively. Construct a 95% confidence interval for β2.
Correct Answer: [-8.348, -0.965]
There are 22 degrees of freedom so the critical value of t for a 95% confidence interval will be 2.074 (the 5% probability will be split between the tails). Thus, the confidence interval will be [-4.657 - 1.78 x 2.074, -4.657 + 1.78 x 2.074] = [-8.348, -0.965].
User Contributed Comments 3
| User | Comment |
|---|---|
| headac | where is 1.78 coming from? T table |
| nowornever | its given as the estimated standard eror for b2 |
| CFAJ | how do we know this is a two tailed test? |