[2008] Topic 7: Basic Ideas of Linear Regression: The Two-Variable Model 相关 interested, including, measures, another, between

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AIM 1: Explain how regression analysis in econometrics measures the relationship between dependent and independent variables.

1、Joe Harris is interested in why the returns on equity differ from one company to another. He chose several company-specific variables to explain the return on equity, including financial leverage and capital expenditures. In his model:

A) return on equity is the independent variable, and financial leverage and capital expenditures are dependent variables

B) return on equity is the dependent variable, and financial leverage and capital expenditures are independent variables.

C) return on equity is the explanatory variable, and financial leverage and capital expenditure are the explained variables.

D) return on equity, financial leverage, and capital expenditures are all independent variables.

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The correct answer is B

The dependent variable is return on equity. This is what he wants to explain. The variables he uses to do the explaining (i.e., the independent variables) are financial leverage and capital expenditures.

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2、The purpose of regression is to:

A) explain the variation in the dependent variable.

B) explain the variation in the independent variable.

C) get the largest R2 possible.

D) explain the mean of the independent variable.

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The correct answer is A

The goal of a regression is to explain the variation in the dependent variable.

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3、The capital asset pricing model is given by: Ri =Rf + Beta ( Rm -Rf) where Rm = expected return on the market, Rf = risk-free market and Ri = expected return on a specific firm. The dependent variable in this model is:

A) Rf.

B) Rm.

C) Rm - Rf.

D) Ri.

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The correct answer is D

The dependent variable is the variable whose variation is explained by the other variables. Here, the variation in ri is explained by the variation in the other variables, rf and rm.

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4、The independent variable in a regression equation is called all of the following EXCEPT:

A) predicted variable.

B) explanatory variable.

C) exogenous variable.

D) predicting variable.

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The correct answer is A

The dependent variable is the predicted variable.

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5、A regression analysis has the goal of:

A) measuring how the properties of the variables regress towards each other.

B) estimating how changes in independent variables affect a dependent variable.

C) estimating how changes in dependent variable affect an independent variable.

D) measuring the tendency of both independent and dependent variables to regress towards their respective means.

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The correct answer is B

A regression analysis has the goal of measuring how changes in one variable, called a dependent or explained variable, can be explained by changes in one or more other variables called the independent or explanatory variables.