ACCA Performance Management (F5) Certification Practice Exam

Which of the following describes the relationships identified in linear regression?

1. Only trend line relationships

2. Time series and correlation relationships

3. Time series and trend line relationships

4. Only cyclical variations

The correct answer is: Time series and trend line relationships

In linear regression, the relationships identified primarily involve the examination of how one variable can be predicted or explained by another variable, often visualized as a line of best fit through a scatter plot of data points. The correct choice highlights that linear regression can analyze relationships not only related to a trend over time but also the overall pattern of data points. Specifically, time series analysis is relevant here because it involves data points collected or recorded at specific time intervals, and linear regression can be used to identify trends in these data over time. This aligns closely with the concept of trend lines, which represent the generalized direction or pattern that the data points follow, facilitating predictions based on historical data. The other options do not accurately capture the full scope of relationships identified by linear regression. For example, while correlation measures the strength and direction of a linear relationship between two variables, it does not inherently involve the time-based component that is critical in time series analysis. The mention of only cyclical variations does not encompass the broader trend or pattern recognition that linear regression seeks to express. Thus, the coupling of time series and trend line relationships illustrates the thorough understanding of the types of interactions that linear regression evaluates, underscoring its capabilities in predictive analysis and understanding of data trends over time