Financial Risk Manager Part 1
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If the value of the independent variable = 0, what would be the expected value of the dependent variable?
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NNikitesh
A
The slope coefficient
B
The residual value
C
The intercept coefficient
D
0
Explanation:
In a linear regression model: E(Y|X) = b₀ + b₁ * X
When X = 0: E(Y|0) = b₀ + b₁ * 0 = b₀
Where:
- b₀ is the intercept coefficient (y-intercept)
- b₁ is the slope coefficient
Therefore, when the independent variable X equals 0, the expected value of the dependent variable Y is equal to the intercept coefficient b₀. This represents the expected value of Y when X is zero, which is the point where the regression line crosses the Y-axis.
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