of the following statements 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

A) II and III only.
B) I, II, and IV only.
C) III and IV only.
D) I and III only.


The correct answer is: C)

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




  1. What does a negative correlation coefficient mean?

    Discover the meaning of a negative correlation coefficient, how this compares to other correlation coefficients and examples ...
  2. Can the correlation coefficient be used to measure dependence?

    Understand the coefficient of correlation and its use in determining the relationship between two variables through the concepts ...
  3. How does correlation affect the stock market?

    Learn about the role correlation plays in prudent stock market investing, and how the correlation coefficient is used to ...
  4. What is the correlation between American stock prices and the value of the U.S. dollar?

    The correlation between any two variables (or sets of variables) summarizes a relationship, whether or not there is any real-world ...
  5. How do I calculate correlation between market indicators and specific stocks?

    Discover how to calculate the correlation coefficient between market indicators and stock prices, a critical skill in technical ...
  6. How does the risk of investing in the Internet sector compare to the broader market?

    Learn how the risk of investing in the Internet sector compares to the broader market and what steps investors take to mitigate ...
  1. Pearson Coefficient

    A type of correlation coefficient that represents the relationship ...
  2. Information Coefficient - IC

    A correlation value that measures the relationship between a ...
  3. Benchmark For Correlation Values

    A benchmark or point of reference chosen by an investment fund ...
  4. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
  5. Excess Kurtosis

    A statistical term describing that a probability, or return distribution, ...
  6. Gini Index

    A measurement of the income distribution of a country's residents. ...
Trading Center