CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

What can we say if the coefficient of determination is 0.94?

I. Direction of relationship is positive.
II. 94% of total variation in one variable is explained by variation in another variable.
III. Strength of relationship is 0.94
A. II only
B. I and II
C. II and III
Explanation: 94% of total variation in one variable is explained by variation in another variable We cannot tell anything about the direction of the relationship from the coefficient of determination or r-squared.

User Contributed Comments 5

User Comment
Andrewua What measures strength? anyone knows...?
nl8585 the r squared.
uviolet correlation coefficient measures strength
rhardin So strength would be .94^1/2, or .97, which is the correlation coefficient.
shrabastee The square root of a number may be positive or negative. Hence, the square root of 0.94 my be either 0.97 or -0.97. Hence, we cannot tell the direction of the relationship. The strength of the relationship is 0.97
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