You generate a Pearson's correlation coefficient to assess whether shareholder value is correlated with the number of employees hired at law firms. Which of the following statement is not accurate when employing this test?
A) It can be used to measure 'effect size'.
B) It varies between -1 and +1.
C) It cannot be used with binary variables (those taking on a value of 0 or 1).
D) It can be used on ranked data.

Question

Quizplus · Accepted Answer

Pearson's correlation coefficient cannot be used with binary variables as it assumes that both variables being tested are continuous and normally distributed. Binary variables are not continuous and do not satisfy this assumption.

You Generate a Pearson's Correlation Coefficient to Assess Whether Shareholder