- CFA Exams
- CFA Exam: Level II 2021
- Study Session 2. Quantitative Methods (1)
- Reading 5. Multiple Regression
- Subject 2. Testing the significance of a regression coefficient
CFA Practice Question
Beth has two independent variables and 25 observations in her regression analysis. The t-statistic for one of the independent variables X1 is 1.98. What is the critical value for Student's t distribution? Is the variable significant at the 5% confidence level? Assume 2-tailed test.
Correct Answer: The critical value is 2.074, and the variable is not significant.
t0.025, 22: 2.074.
As 1.98 < 2.074, the variable is not significant at the 5% confidence level.
The degrees of freedom: 25 - 2 - 1 = 22.
t0.025, 22: 2.074.
As 1.98 < 2.074, the variable is not significant at the 5% confidence level.
User Contributed Comments 2
| User | Comment |
|---|---|
| wink26 | Why not 1.717? I thought the CI was 5%? |
| jhmorris | Since the t-test seeks to determine whether or not the null hypothesis that X1 is equal to zero should be rejected, this is a two-tailed test. As such, at the 5.00% significance level, you use column 2 to determine the critical value. |