Question #14

Reading: Reading 1 Multiple Regression

PDF File: Reading 1 Multiple Regression.pdf

Page: 6

Status: Unattempted

Correct Answer: A

Part of Context Group: Q13-14
Shared Context
- Based on the credit spread model, if an issuer gets included in the CDX index and assuming everything else the same, which of the following statements most accurately describes the model's forecast? A) The credit spread on the firm’s issue would decrease by 10 bps. B) The credit spread on the firm’s issue will increase by 32 bps. C) The credit spread on the firm’s issue will decrease by 32 bps.
Question
Which assumption of multiple regression is most likely evaluated using a QQ plot?
Answer Choices:
A. Serial correlation of residuals
B. Conditional heteroskedasticity
C. Error term is normally distributed
Explanation
A normal QQ plot of the residuals can visually indicate violation of the assumption that the residuals are normally distributed.
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