- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 7. Introduction to Linear Regression
- Subject 3. Assumptions of the Simple Linear Regression Model
CFA Practice Question
Which of the following is (are) assumptions of a linear regression?
II. The errors are normally distributed with mean zero.
III. The errors are statistically uncorrelated.
I. For every given value of the independent variable, the dependent variable is normally distributed.
II. The errors are normally distributed with mean zero.
III. The errors are statistically uncorrelated.
A. II and III
B. I and III
C. I, II and III
Explanation: For every given value of the independent variable, the error terms are normally distributed with mean zero, and the error terms are statistically uncorrelated.
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