- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 4. Introduction to Linear Regression
- Subject 1. Linear regression
CFA Practice Question
A financial economist runs the following regression:
B. dependent; independent.
C. independent; independent.
Demand for cars = alpha + beta*income level + error
In this regression, the demand for cars is ______ variable and the income level is ______ variable.
A. dependent; dependent.
B. dependent; independent.
C. independent; independent.
Correct Answer: B
The left-hand side variable is the dependent variable since its behavior in the equation is being explained by the right-hand side variable, which is the independent variable. Note, however, that this does not imply any kind of causal relationship in general.
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