- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 10. Simple Linear Regression
- Subject 6. Functional Forms for Simple Linear Regression
CFA Practice Question
Which model usually works well in situations where the effect of X on Y always retains the same sign (positive or negative) but its impact decreases?
A. The lin-log model
B. The log-lin model
C. The log-log model
Explanation: In economics, many situations are characterized by diminishing marginal returns. This model is typically used when the impact of the independent variable on the dependent variable decreases as the value of the independent variable increases.
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