Financial Risk Manager Part 1
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Study the following table:
| Source | Sum of squares |
|---|---|
| Explained | 825 |
| Residual | 625 |
The total sum of squares is closest to:
Other
Community
NNikitesh
A
1.32
B
200
C
1450
D
0.7576
Explanation:
The total sum of squares (TSS) is calculated by adding the explained sum of squares and the residual sum of squares. From the table:
- Explained sum of squares = 825
- Residual sum of squares = 625
TSS = Explained SS + Residual SS = 825 + 625 = 1450
This is a fundamental concept in regression analysis where the total variation in the dependent variable is partitioned into explained variation (by the model) and unexplained variation (residual).
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