Page 35 - FINAL CFA II SLIDES JUNE 2019 DAY 2
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LOS 8.g: Calculate and interpret the F- READING 8: MULTIPLE REGRESSION AND ISSUES IN REGRESSION ANALYSIS
statistic, and describe how it is used in
regression analysis. MODULE 8.3: ANOVA AND THE F-TEST
How do you test all the coefficients simultaneously? Conduct each t-test individually?
No -5% SL of each when combined is NOT 5% but higher. At exams, just use F if testing all coefficients simultaneously.
EXAMPLE: Calculating and interpreting the F-statistic: An analyst runs a regression of monthly value-stock returns on five
independent variables over 60 months. The total sum of squares is 460, and the sum of squared errors is 170. Test Ho at the 5%
SL that all five of the independent variables are equal to zero.
The critical F-value for 5
and 54 df at 5% SL is 2.40.
It’s a 1TT (despite = sign),
so use the 5% -always F-table!
Reject Ho and conclude that at
least one of the five independent
variables is significantly different
than zero.
