# CFA Level 2 – Quantitative Methods Session 3 – Reading 12 Multiple Regression and Issues in Regression Analysis

## CFA Level 2 – Quantitative Methods, Session 3 – Reading 12

### Multiple Regression and Issues in Regression Analysis – LOS l

#### (Practice Questions, Sample Questions)

1. An analyst is building a regression model which returns a qualitative dependant variable based on a probability distribution. This is least likely a:

A) probit model.
B) logit model.
C) discriminant model

Explanation — C: A probit model is a qualitative dependant variable which is based on a normal distribution. A logit model is a qualitative dependant variable which is based on the logistic distribution.

A discriminant model returns a qualitative dependant variable based on a linear relationship that can be used for ranking or classification into discrete states

2. Which of the following questions is least likely answered by using a qualitative dependent variable?

A) Based on the following company-specific financial ratios, will company ABC enter bankruptcy?
B) Based on the following executive-specific and company-specific variables, how many shares will be acquired through the exercise of executive stock options?
C) Based on the following subsidiary and competition variables, will company XYZ divest itself of a subsidiary?

Explanation — B: The number of shares can be a broad range of values and is, therefore, not considered a qualitative dependent variable.

3. Which of the following is NOT a model that has a qualitative dependent variable?

A) Logit.
B) Event study.
C) Discriminant analysis

Explanation — B: An event study is the estimation of the abnormal returns–generally associated with an informational event—that take on quantitative values

4. A high-yield bond analyst is trying to develop an equation using financial ratios to estimate the probability of a company defaulting on its bonds.

Since the analyst is using data over different economic time periods, there is concern about whether the variance is constant over time. A technique that can be used to develop this equation is:

A) multiple linear regression adjusting for heteroskedasticity.
B) logit modeling.
C) dummy variable regression

Explanation — B: The only one of the possible answers that estimates a probability of a discrete outcome is logit modeling

5. What is the main difference between probit models and typical dummy variable models?

A) There is no difference–a probit model is simply a special case of a dummy variable regression.
B) Dummy variable regressions attempt to create an equation to classify items into one of two categories, while probit models estimate a probability.
C) A dummy variable represents a qualitative independent variable, while a probit model is used for estimating the probability of a qualitative dependent variable

Explanation — C: Dummy variables are used to represent a qualitative independent variable. Probit models are used to estimate the probability of occurrence for a qualitative dependent variable

Remember! This is just a sample.

You can get a custom paper by one of our expert writers.

Helping students since 2015

Calculate the price
Pages (550 words)
\$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Homework Mules
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Education
Thank you so much, Reaserch writer. you are so helpfull. I appreciate all the hard works. See you.
Customer 452701, February 12th, 2023
Political science
I like the way it is organized, summarizes the main point, and compare the two articles. Thank you!
Customer 452701, February 12th, 2023
Great paper thanks!
Customer 452543, January 23rd, 2023
Accounting
Thank you for your help. I made a few minor adjustments to the paper but overall it was good.
Customer 452591, November 11th, 2021
Technology
Customer 452551, October 22nd, 2021
Finance
Thank you very much!! I should definitely pass my class now. I appreciate you!!
Customer 452591, June 18th, 2022
Psychology
Thank you. I will forward critique once I receive it.
Customer 452467, July 25th, 2020
Political science
Thank you!
Customer 452701, February 12th, 2023
Psychology
I requested a revision and it was returned in less than 24 hours. Great job!
Customer 452467, November 15th, 2020
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend