- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 4. Introduction to Linear Regression
- Subject 3. The standard error of estimate and the coefficient of determination

###
**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.

###
**User Contributed Comments**
0

You need to log in first to add your comment.