CFA Practice Question

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CFA Practice Question

Which of the following is not a factor in reducing the variance of the predicted errors for the dependent variable given an estimated regression model?

A. An increase in the value of the regression coefficient.
B. A decrease in the standard error of estimate (SEE).
C. The value of the predicted independent value being closer to its mean.
Correct Answer: A

The estimated variance of the predicted errors for the dependent variable is given as follows:

Thus, the value of the regression coefficient has no impact on the variance of the predicted errors.

An increase in the sample size can also reduce the variance of the predicted errors.

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