What Types of Dependent Variables Are Ok to Use for Linear

question 21

Multiple Choice

What types of dependent variables are ok to use for linear regression?

• A) interval/ratio variables
• B) interval/ratio variables and dichotomies
• C) interval/ratio variables, ordinal variables, and dichotomies
• D) interval/ratio variables, ordinal variables, and nominal variables

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Definitions:

Risk Premium

The extra return above the risk-free rate that investors demand for choosing to invest in a riskier asset.

Well-diversified Portfolio

An investment portfolio strategically crafted to include a variety of asset classes in order to minimize risk.

Regression Coefficient

A quantitative measure in statistics that represents the strength and direction of the relationship between a dependent variable and an independent variable in a regression analysis.

Single Factor Model

A model that explains the returns of an asset or portfolio using a single risk factor.