Question #72

Reading: Reading 1 Multiple Regression

PDF File: Reading 1 Multiple Regression.pdf

Page: 34

Status: Unattempted

Part of Context Group: Q72-74 First in Group
Shared Context
- Which of the following is least likely to be an assumption regarding linear regression? A) A linear relationship exists between the dependent and independent variables. B) The variance of the residuals is constant. C) The independent variable is correlated with the residuals.
Question
Based upon the information presented in the ANOVA table, what is the coefficient of determination?
Answer Choices:
A. 0.084, indicating that the variability of industry returns explains about 8.4% of the variability of company returns
B. 0.916, indicating that the variability of industry returns explains about 91.6% of the variability of company returns
C. 0.839, indicating that company returns explain about 83.9% of the variability of industry returns
Explanation
The coefficient of determination (R2) is the percentage of the total variation in the dependent variable explained by the independent variable. The R2 = (RSS / SS) Total = (3,257 / 3,555) = 0.916. This means that the variation of independent variable (the airline industry) explains 91.6% of the variations in the dependent variable (Pinnacle stock).
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