Reading 11- LOS B : Q1 presence, following, class

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1.One of the limitations of correlation analysis of two random variables is the presence of outliers, which can lead to which of the following erroneous assumptions?

A)   The absence of a relationship between the two variables, when in fact, there is a linear relationship.

B)   The absence of a relationship between the two variables, when in fact, there is a nonlinear relationship.

C)   The presence of a nonlinear relationship between the two variables, when in fact, there is a linear relationship.

D)   The presence of a nonlinear relationship between the two variables, when in fact, there is no relationship whatsoever between the two variables.

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The correct answer was A)

Outliers represent a few extreme values for sample observations in a correlation analysis. They can either provide statistical evidence that a significant relationship exists, when there is none, or provide evidence that no relationship exists when one does.