- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 10. Simple Linear Regression
- Subject 4. Hypothesis Testing of Linear Regression Coefficients
CFA Practice Question
True or False? If False, correct the statement.
Suppose a 95% confidence interval for the slope (β) of the straight line regression of Y on X is given by -3.5 < β < -0.5. Then a two-sided test of the hypothesis H(0): β = -1 would result in rejection of H(0) at the 1% level of significance.
Correct Answer: False
Since H(0): β = -1 would not be rejected at α = 0.05, it would not be rejected at α = 0.01.
User Contributed Comments 7
| User | Comment |
|---|---|
| webII | maybe I'm missing something...how does a=.05 stronger than a=.01? |
| danlan2 | 5% level is weaker than 1% level, since it can not be rejected at 5% level, it can not be rejected at 1% level |
| Adkins08 | Confidence interval for a 99% confidence interval (alpha is 1%) must be wider than a 95% confidence interval (alpha is 5%). Therefore, if the H(0) value is accepted at an alpha of 5%, it must be accepted at an alpha of 1% |
| MattNYC | If the calculated value (-1) falls within the acceptance range (-3.5, -0.5) then we FAIL to reject the Null |
| Tukker | If it is within the 95% range, it also fits within the wider 99% range. Don´t get tricked by the 1% expression! |
| mazen1967 | we cant reject the nul at 5% segnificancy level consiquantly we cant reject at lesser level |
| quanttrader | 99% CI is wider (ie more conservative) than 95% CI. Therefore since beta = -1 falls within the 95% CI, it must also fall within the 99% CI (ie alpha = 1%) |