CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

Which of the following would not be an assumption underlying a multiple regression model?

A. The error terms are normally distributed.
B. There must be a linear relationship between the dependent variable and every independent variable.
C. The error term has a variance that is the same for all observations.
D. A linear relationship must also exist between two or more of the independent variables.
Correct Answer: D

The fact is that there must be no perfect linear relationship among the independent variables. In other words, there should be no "multicollinearity" among the independent variables.

User Contributed Comments 3

User Comment
amamed213 i think B is not an assumption. the modele don't require a linear relationship between the dependant variable and every independant variable. Can someone explain more ?
Adi8232 If there is not a linear relationship between the dependent variable(Y) and ANY independent Variable(say X3) then why will you use that X3 in the equation, because you want value of Y and adding some non related will be useless (ex. Car mileage(Y) and number of candidates passing CFA L2(X)), will you use Y= a + bX?
Mikehuynh Hi amanmed213,

Just need to remember that we are talking about linear regression
You need to log in first to add your comment.