The Two Interconnected Concepts That Lie at the Heart of Many

question 90

Multiple Choice

The two interconnected concepts that lie at the heart of many financial crises are:

• A) rational expectations and leverage.
• B) irrational expectations and forecasting.
• C) forecasting and leverage.
• D) irrational expectations and leverage.

---

Definitions:

Stepwise Regression

A procedure in regression analysis that automatically chooses the variables to be used for prediction.

Forward Selection

A stepwise regression approach where variables are sequentially added to the linear model based on their statistical significance in explaining the outcome variable.

Backward Elimination

A method in statistical model building where all variables are included at the start and then removed one by one based on some criteria.

F Statistic

A ratio used in ANOVA tests to determine if the variances between means of several groups are significantly different.