Q:

Which of the following statements is (are) true with respect to the coefficient of determination?
I. Coefficient of determination and correlation coefficient must always have the same algebraic sign (i.e. plus or minus).
II. As the sum of squares of the error terms increases, coefficient of determination will increase as well.
III. Coefficient of determination measures the proportion of the total variation in Y that is accounted for by the variation in X.
IV. As the ratio of regression sum of squares to total sum of squares increases, correlation coefficient will increase.
a) II and III only.
b) I, II, and IV only.
c) III and IV only.
d) I and III only.

A:

The correct answer is: c)

(I) is incorrect because coefficient of determination will always be positive, whereas correlation coefficient may be positive or negative.


RELATED FAQS

  1. A 7-year, 6% coupon callable bond is currently trading at 96.25.  The ...

    Free info on financial certification exams including study guides, exam questions, and much more!
  2. According to SEC Release IA-1092, which of the following would NOT qualify as an ...

    The correct answer is C). SEC Release IA-1092 considers financial planners, pension consultants and sports and entertainment ...
  3. Your client, Todd, owns 100 shares HAT stock in his taxable stock portfolio ...

    The correct answer is a): Since Todd owns the stock and expects another stagnant year ahead, he would employ a covered call ...
  4. An individual has started investments of $100/month into a spread-load ...

    The correct answer is b. When a periodic payment (or contractural) plan company is organized as a spread-load company, it ...
RELATED TERMS
  1. No results found.

You May Also Like

Related Articles
  1. No results found.
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!