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Free Questions › CFA › Quantitative Methods
Free CFA Quantitative Methods Practice Questions & Answers
1,200 exam-style Quantitative Methods questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 61
In logistic regression, the model estimates:
Select an option first.
Correct answer: A — The probability of the dependent variable taking a particular value
Explanation: Right: Logistic regression outputs probabilities. Wrong: B/C/D: Not its main output.
Question 62
A common use of logistic regression in finance is to:
Select an option first.
Correct answer: B — Classify firms as likely to default or not
Explanation: Right: Default prediction is a classic logistic regression application. Wrong: A/C/D: Different tasks.
Question 63
In logistic regression, the dependent variable is often coded as:
Select an option first.
Correct answer: B — 0 and 1
Explanation: Right: Binary coding (0/1) is standard. Wrong: A/C/D: Not typical.
Question 64
A time series is:
Select an option first.
Correct answer: A — A set of observations ordered over time
Explanation: Right: Time series are indexed by time. Wrong: B/C/D: Not definitions.
Question 65
A linear trend model for a time series typically includes:
Select an option first.
Correct answer: B — A constant and a time variable
Explanation: Right: Linear trend: level + slope × time. Wrong: A/C/D: Different structures.
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Question 66
A log-linear trend model is often used when:
Select an option first.
Correct answer: A — The series grows at a roughly constant percentage rate
Explanation: Right: Log-linear models capture constant growth rates. Wrong: B/C/D: Not the main use.
Question 67
A covariance-stationary time series has:
Select an option first.
Correct answer: A — Constant mean and variance over time
Explanation: Right: Stationarity requires constant mean and variance. Wrong: B/C/D: Not stationary.
Question 68
An autoregressive (AR) model explains the current value of a series using:
Select an option first.
Correct answer: B — Past values of the series
Explanation: Right: AR models use lagged values of the series. Wrong: A/C/D: Not AR.
Question 69
In an AR(1) model, the current value depends on:
Select an option first.
Correct answer: A — One lagged value
Explanation: Right: AR(1) uses one lag. Wrong: B/C/D: Different orders.
Question 70
Mean reversion in a time series means:
Select an option first.
Correct answer: B — The series tends to move back toward its long-run average
Explanation: Right: Mean-reverting series pull back toward a long-run level. Wrong: A/C/D: Opposite or unrelated.
Question 71
A random walk is a time series where:
Select an option first.
Correct answer: C — Changes are random and the best forecast is the last observed value
Explanation: Right: Random walk: next value = last value + random shock. Wrong: A/B/D: Not random walk.
Question 72
A unit root in a time series indicates:
Select an option first.
Correct answer: B — Nonstationarity
Explanation: Right: Unit root processes are nonstationary. Wrong: A/C/D: Incorrect.
Question 73
A moving average (MA) model uses:
Select an option first.
Correct answer: B — Past error terms
Explanation: Right: MA models depend on past shocks (errors). Wrong: A/C/D: Not MA.
Question 74
A simple moving average forecast of order (n) is:
Select an option first.
Correct answer: B — The average of the most recent (n) observations
Explanation: Right: SMA uses the last (n) observations. Wrong: A/C/D: Not the definition.
Question 75
Seasonality in a time series refers to:
Select an option first.
Correct answer: C — Regular patterns that repeat at fixed intervals
Explanation: Right: Seasonality is periodic behavior. Wrong: A/B/D: Different phenomena.
Question 76
A common way to model seasonality is to:
Select an option first.
Correct answer: B — Add seasonal dummy variables
Explanation: Right: Seasonal dummies capture recurring patterns. Wrong: A/C/D: Poor practice.
Question 77
Comparing forecast models often involves:
Select an option first.
Correct answer: A — Comparing their forecast errors (e.g., mean squared error)
Explanation: Right: Forecast accuracy is judged by error metrics. Wrong: B/C/D: Not meaningful.
Question 78
Instability of regression coefficients over time suggests:
Select an option first.
Correct answer: B — The relationship between variables may have changed
Explanation: Right: Changing coefficients indicate evolving relationships. Wrong: A/C/D: Not implied.
Question 79
Unsupervised learning is used to:
Select an option first.
Correct answer: B — Discover patterns or groupings without labeled outcomes
Explanation: Right: Unsupervised learning finds structure in unlabeled data. Wrong: A/C/D: Different tasks.
Question 80
K-nearest neighbors (KNN) classifies an observation based on:
Select an option first.
Correct answer: B — The majority class among its closest neighbors
Explanation: Right: KNN uses nearby points to classify. Wrong: A/C/D: Not KNN.
Question 81
Support vector machines (SVM) aim to:
Select an option first.
Correct answer: A — Find a hyperplane that maximizes the margin between classes
Explanation: Right: SVMs maximize the margin between classes. Wrong: B/C/D: Not their goal.
Question 82
Clustering algorithms (like k-means) are used to:
Select an option first.
Correct answer: B — Group similar observations without labels
Explanation: Right: Clustering finds groups in unlabeled data. Wrong: A/C/D: Different tasks.
Question 83
Unstructured data in finance often includes:
Select an option first.
Correct answer: B — Text from news articles or earnings calls
Explanation: Right: Text is a classic unstructured data type. Wrong: A/C/D: Structured.
Question 84
Data cleaning (or preparation) commonly involves:
Select an option first.
Correct answer: B — Handling missing values, correcting errors, and standardizing formats
Explanation: Right: Cleaning improves data quality. Wrong: A/C/D: Poor practice.
Question 85
Model evaluation in a data project typically involves:
Select an option first.
Correct answer: B — Using metrics (e.g., accuracy, mean squared error) on validation or test data
Explanation: Right: Proper evaluation uses metrics on unseen data. Wrong: A/C/D: Incomplete or misleading.
Question 86
A regression coefficient is statistically significant when:
Select an option first.
Correct answer: B — Its p‑value is low
Explanation: Low p‑value → strong evidence the coefficient differs from zero. A/C/D: Sign or size alone does not determine significance.
Question 87
A negative slope coefficient means:
Select an option first.
Correct answer: A — The dependent variable decreases as the independent variable increases
Explanation: Negative slope = inverse relationship. B/C/D: Incorrect interpretations.
Question 88
A regression model with too many irrelevant variables is likely to:
Select an option first.
Correct answer: A — Have inflated standard errors
Explanation: Extra noise increases variance of estimates. B/C/D: Not consequences.
Question 89
A model with too few variables (omitting relevant ones) may suffer from:
Select an option first.
Correct answer: A — Omitted variable bias
Explanation: Missing relevant predictors biases coefficients. B/C/D: Incorrect.
Question 90
A regression model with a very small sample size is likely to have:
Select an option first.
Correct answer: B — Unstable and imprecise estimates
Explanation: Small samples → high uncertainty. A/C/D: Not necessarily true.
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