CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

In comparing the relation of company sales with GDP, your regression software provides the following output:

Is it possible that the regression coefficient is insignificant at the 95% level of confidence?
A. No since the t-statistic of 4.86 greatly exceeds the critical values of the insignificance acceptance range.
B. No, since the t-statistic is within the critical values of the insignificance acceptance range.
C. Yes, since the t-statistic is not large enough to be classified as insignificant.
Explanation: t-start = 0.85/0.175 = 4.86.

t-critical at df = 89 and α = 0.025 is 2.0.

Note that with a large sample size (over 30), we can begin to rely on the more familiar z-statistics.

User Contributed Comments 5

User Comment
zwer Are we supposed to derive critical values ourselves during the exam?
volkovv Unlikely (but we may). I think it is worthwhile to remember main critical values for 90%, 95%, 99% and the trends in values, such as critical values decrease when degrees of freedom increase
mcspaddj The critical value for T in this case is the (coefficient - zero)/ standard error.

My problem with this question is that there is always a theoretical possiblity of the variable being insignificant. Even if we had a t value approaching infinity, there will still be a possibility (albeit extremely small) chance of an error in rejecting/failing to reject the null hypothesis.
dblueroom mcspaddj, we don't have to worry about that, leave that to statisticians.
ramdabom I believe we could have used F-statistic as well
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