Understanding R-Squared and Multiple R in CFA: A Quick Guide
One of the most important topics in the CFA readings is the basic calculation of linear regression. In the exam, you'll likely encounter linear regression problems where you'll be given a statistical table or various data sets. You'll need to extract useful information from these data tables to perform calculations and judge whether the regression is good or not. This is a crucial skill for analysts, not just for passing the exam but for your future career.
Let's talk about the coefficient of determination. The CFA will likely test your knowledge of this concept. We can call it R-squared or coefficient of determination. When the CFA tests you, based on our research team's experience, they often provide a statistics table. The test questions might give you regression statistics with a long list of terms, and you need to choose the correct ones.
One thing that can be confusing is the difference between Multiple R and R-squared. If you encounter a problem where you see both Multiple R and R-squared, you should know their differences. In quizzes, these terms are sometimes used interchangeably. When a question asks about the coefficient of determination, they're asking about R-squared, which is the indicator explaining the power of the regression. In the regression statistics, you'll find both Multiple R and R-squared, but they're different measures - Multiple R is actually the square root of R-squared.