CFA Level 1 Regression Equation - Understanding the Role of "a"

Understanding the Role of "a" in Regression Equations

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Question

In the regression equation, what does the letter "a" represent?

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Explanations

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A. B. C. D.

B

The regression is written as Y' = a + bX. The letter "a" is the Y intercept and b is the slope of the line.

In the context of a regression equation, the letter "a" typically represents the Y-intercept. The regression equation is used to model the relationship between a dependent variable (Y) and one or more independent variables (X). It is often represented as:

Y = a + bX

Here, "a" represents the Y-intercept, which is the value of the dependent variable when all independent variables are equal to zero. In other words, it is the point where the regression line intersects the Y-axis.

To understand this concept, imagine a simple scatter plot where the points are scattered around a line. The Y-intercept is the point on the Y-axis where the line intersects. It indicates the starting point of the regression line when all independent variables have a value of zero.

Choosing the correct answer from the options provided, the letter "a" in the regression equation corresponds to option B: Y intercept. Therefore, option B is the correct answer.