CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

Which of the following statements least accurately describes the interpretation of the coefficient of determination?

A. A high coefficient of determination implies a high degree of dispersion around the regression line.
B. A high coefficient of determination does not always imply that the regression is economically sound.
C. Coefficient of determination is the square of the correlation coefficient and therefore is always positive.
Explanation: The coefficient of determination is the square of the correlation coefficient. Therefore, if there is a high degree of dispersion around the regression line, the correlation coefficient will be low and hence its square will be low as well. Also, since the coefficient of determination is a square, it will always be positive.

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