- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 4. Introduction to Linear Regression
- Subject 1. Linear regression

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**CFA Practice Question**

Consider the following statements relating to the slope of a regression equation.

II. If the variables are negatively correlated, the slope of the regression line will be negative.

III. If the variables are uncorrelated, the regression line will have a slope of 0.

I. If the variables are positively correlated, the slope of the regression line will be positive.

II. If the variables are negatively correlated, the slope of the regression line will be negative.

III. If the variables are uncorrelated, the regression line will have a slope of 0.

Which statement(s) is (are) TRUE?

Correct Answer: I, II and III

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**User Contributed Comments**
3

User |
Comment |
---|---|

arudkov |
is there gonna be a @line@ with no correlation for III? |

ybavly |
@ arudkov: I think there would be a line. QUESTION: if there is no correlation there could be any number of slopes... not necessarily 0, correct? |

Teeto |
If there is no corellation (linear relationship) then it is not possible to explain Y using X. The best guess for Y would be it's average value. So YBar=b0=AVG(Y), no slope and no X in the equation. |