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CFA Level 2
Quantitative Methods

Interpretation of Regression Coefficient for Store Size

Easy Multiple Regression Analysis Regression Coefficients

A financial analyst is conducting a multiple regression analysis to explore the factors affecting the sales of a retail company. The model the analyst built is as follows:

$$ ext{Sales} = eta_0 + eta_1 ext{Price} + eta_2 ext{Advertising} + eta_3 ext{Store \\ Size} + ext{Error} $$

In this model, the coefficients $$eta_1$$, $$eta_2$$, and $$eta_3$$ represent the respective impacts of price, advertising expenditure, and store size on sales. During the analysis, the analyst finds that the estimated coefficient for price ($eta_1$) equals -3, the coefficient for advertising ($eta_2$) equals 2, and the coefficient for store size ($eta_3$) equals 4.

Given this information, which of the following statements correctly interprets the regression coefficient for store size ($eta_3$)?

Hint

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