- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 4. Introduction to Linear Regression
- Subject 3. The standard error of estimate and the coefficient of determination
CFA Practice Question
What can we say if the coefficient of determination is 0.94?
II. 94% of total variation in one variable is explained by variation in another variable.
III. Strength of relationship 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 |