Quant Schweser_Question ID#: 86494 床罩, statements, executive, explained

Beatnik

Which of the following statements is least likely an example of a qualitative dependent variable? The:
A) probability of bankruptcy is explained by several company-specific financial ratios.
B) number of shares acquired through the exercise of executive stock options, explained by executive-specific and company-specific variables.
C) likelihood that a company will divest itself of a subsidiary, explained by subsidiary and competition variables.
The correct answer was B) number of shares acquired through the exercise of executive stock options, explained by executive-specific and company-specific variables.
The number of shares is a continuous variable and is, therefore, not considered a qualitative dependent variable.
My queries:
1. Number of shares can be counted and why is it conidered as continuous variable (eg time)?
2. ‘least likely an example of a qualitative dependent variable’, means I thought, we need to look for quantitaive variable and thus, I opted for choice A
Could anyone help to clarify my query. Thanks in advance.

bkballa

Qualitative Dependent Variable is a Dummy Variable, which can only have value of either 0 or 1.
Choices A and C indicate that value of the dependent variable could be 0 or 1.
For choice B, the value of dependent variable ‘number of shares’ could be any number and it is not ‘true’ or ‘false’ kind of forecast.
So, B should be the correct answer. Did this help?

giants2010

I thot probability is a real number between 0 and 1 , and 0 or 1 are just two of infinitely many values it could assume
So also is likelihood , another name for probability . Are we redefining these terms when it suits us?
But I agree that Number of shares is the right answer , because it can be estimated by a quantitative model such as Black-Scholes

tarunajwani

Probability (and likelihood which is the same as probability) can take any value between 0 and 1.
But the probabilities are not the qualitative dependent variables in choices A & C. The variables are for choice A)Bankruptcy - whether the company will go bankrupt (Yes or No)
C) Divestiture - whether the coompany will divest (Yes or No)
The probabilities will help explain the chances of bankrupty or divestiture (they will be the coefficients of the independent variables like the financial ratios etc).
Hope that helps.
- VR