- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 10. Simple Linear Regression
- Subject 1. Estimation of the Simple Linear Regression Model
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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