The manager can be 95% confident that the true value of the underlying parameters in a regression is not zero if the absolute value of t-statistic is
A)less than 1.
B)less than 2.
C)greater than 1.
D)greater than 2.

Question

Quizplus · Accepted Answer

In regression analysis, the t-statistic is calculated by dividing the estimated parameter by its standard error. The absolute value of the t-statistic measures the number of standard errors that the estimated parameter is away from zero. A t-statistic greater than 2 indicates that the estimated parameter is significant at the 5% level, meaning that we can reject the null hypothesis that the parameter is equal to zero with 95% confidence. Therefore, if the absolute value of the t-statistic is greater than 2, the manager can be 95% confident that the true value of the underlying parameter in the regression is not zero. Choice D is the best option as it reflects this understanding.

The Manager Can Be 95% Confident That the True Value