As a preliminary step in the selection of variables to use in a statistical-fore

Question

As a preliminary step in the selection of variables to use in a statistical-forecasting model, the auditor has calculated the coefficient of correlation between the firm's sales and three economic indexes. The results were as follows

Index Coefficient of correlation

A1 105

B2 -0.009

C3 -0.854

Which of the following statements indicates the best course of action for the auditor to take in the development of a forecasting model?

A. Drop all three indexes from further consideration because a coefficient of correlation of +2.00 is necessary for a statistically significant relationship

B. Include only indexes B2 and C3 in the model becuase they have the only negative coefficients of correlation

C. Include only index C3 in the model because its coefficient of correlation is significant, while the coefficients of indexes A1 and B2 are likely to be insignificant

D. Include only index A1 in the model because it has the only positive coefficient of correlation

E. None of the above

Explanation / Answer

As a preliminary step in the selection of variables to use in a statistical-forecasting model, the auditor has calculated the coefficient of correlation between the firm's sales and three economic indexes. The results were as follows

Index Coefficient of correlation

A1 105

B2 -0.009

C3 -0.854

Which of the following statements indicates the best course of action for the auditor to take in the development of a forecasting model?

A. Drop all three indexes from further consideration because a coefficient of correlation of +2.00 is necessary for a statistically significant relationship

B. Include only indexes B2 and C3 in the model becuase they have the only negative coefficients of correlation

C. Include only index C3 in the model because its coefficient of correlation is significant, while the coefficients of indexes A1 and B2 are likely to be insignificant

D. Include only index A1 in the model because it has the only positive coefficient of correlation

E. None of the above

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.