Suppose That the Following Model Was Fit to a Set $$E ( y ) = \beta _ { 0 } + \beta _ { 1 } x _ { 1 } + \beta _ { 2 } x _ { 2 }$$

question 43

Multiple Choice

Suppose that the following model was fit to a set of data. $$E ( y ) = \beta _ { 0 } + \beta _ { 1 } x _ { 1 } + \beta _ { 2 } x _ { 2 }$$
The corresponding plot if residuals against predicted values $\hat{y}$ is shown. Interpret the plot.

• A) It appears that the variance of ? is not constant.
• B) The residuals appear to be randomly scattered so that no model modifications are necessary.
• C) It appears that the data contain an outlier.
• D) It appears that a quadratic model would be a better fit.

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Definitions:

Noncontrolling Interest

The portion of equity in a subsidiary not directly or indirectly owned by the parent company.

Cash Dividends

Dividends paid in the form of cash to a company's shareholders from its current or accumulated earnings.

Additional Paid-In Capital

The amount of money that shareholders have paid in excess of the par value of the shares, representing a source of non-debt based capital for the company.

Goodwill

A non-physical asset created when acquiring a business at a cost higher than the fair value of its identifiable net assets.