Using the Hat Matrix Elements Hᵢ to Determine Influential Points

question 103

Multiple Choice

Using the hat matrix elements hᵢ to determine influential points in a multiple regression model with k independent variable and n observations, Xᵢ is an influential point if

• A) hᵢ < 2(k + 1)/n.
• B) hᵢ > 2(k + 1)/n.
• C) hᵢ < n(k + 1)/2.
• D) hᵢ > n(k + 1)/2.

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Definitions:

Perpetuities

A type of annuity that receives an infinite series of identical cash flows with no end.

Deep Discount Bonds

Bonds that are issued at a significantly lower price than their par value, often with higher yields to compensate for the risk.

Price Volatility

The rate at which the price of a security increases or decreases for a given set of returns, indicative of the risk or uncertainty of the security's value over time.

Reinvestment Risk

The risk of earning less interest or dividends from future investments when existing bonds, stocks, or other income-generating assets mature or are sold.