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8、Consider the regression results from the regression of Y against X for 50 observations:

Y = 5.0 - 1.5 X

The standard error of the estimate is 0.40 and the standard error of the coefficient is 0.45. The predicted value of Y if X is 10 is:

A) -10.

B) 10.

C) 20.

D) 4.5.

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The correct answer is A

The predicted value of Y is: Y = 5.0 – [1.5 (10)] = 5.0 – 15 = -10

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AIM 4: Define and interpret the stochastic error term, noise components.

In a regression analysis, the effects from independent variables that are not included in the model are embodied in the:

A) error term.

B) intercept.

C) scattergram.

D) slope coefficient.

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The correct answer is A

The error term embodies the effect of variables omitted from the model.

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AIM 6: Define and interpret the sample regression function, regression coefficients, parameters, slope and the intercept.

Which of the following are included in a sample regression function?

?            The intercept.

?            The error term.

?            The slope coefficient.

?            The independent variable.

A) I, II, III, and IV.

B) III and IV only.

C) I and III only.

D) I, III, and IV only.

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The correct answer is D

The sample regression function has a residual and not an error term. Although the residual and error term serve a similar purpose in their respective equations, there are distinctions.

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AIM 7: Explain the concept of linear regression.

Trudy Baker, FRM and Steven Phillips, FRM are planning to do a regression analysis. They discuss specifying the equation they wish to estimate. Baker proposes the specification E(Yi|Xi) = B0 + (B1) × (Xi2). Phillips proposes the specification (Yi|Xi) = B0 + (B1 × Xi)2. Which, if either, is appropriate using linear regression?

A) Neither the specification of Baker nor that of Phillips.

B) The specification of Phillips but not that of Baker.

C) Both the specification of Baker and Phillips.

D) The specification of Baker but not that of Phillips.

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The correct answer is D

Since the specification of Phillips would essentially be B0 + (B12) × (Xi2), this precludes the application of linear regression analysis because there is an exponent on B1, i.e., the specification is nonlinear with respect to the parameters.

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AIM 9: Explain the process of ordinary least squares of estimation.

1、Sample regression coefficients are often estimated with a process known as:

A) a scattergram.

B) a population regression function.

C) Ockham's razor.

D) ordinary least squares.

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The correct answer is D

Ordinary least squares or OLS is a method for estimating population coefficients. It provides the line that minimizes the squared deviations of the dependent variables in the sample from the sample regression line.