2025 CFA Level II Exam: CFA Study Preparation

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Basic Question 2 of 3

Which of the following could be a multiple linear regression model?

I. Y_t = b₀ + b₁ X_1t + b₂ X_2t + e_t.
II. Y_t = b₀ + b₁ X_1t + e_t.
III. Y_t = b₀ + b₁ X_1t + b₂ e^(X_2t) + e_t.

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User Contributed Comments 3

User	Comment
ericczhang	Linear regressions only require that the parameters are linear, i.e. the b values are constant slopes that map the independent variables, which can be non-linear, onto the dependent variable.
davcer	also II is not multiple
johangw	Do b1 and b2 have to be linear? Or can it be like (b1)square in the multiple linear regression model?

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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.

Tamara Schultz

Learning Outcome Statements

formulate a multiple linear regression model, describe the relation between the dependent variable and several independent variables, and interpret estimated regression coefficients;

CFA® 2025 Level II Curriculum, Volume 1, Module 1.