F-statistic

A test statistic that is a ratio of two variances. In regression, explained variation per slope over residual variation per degree of freedom, (RSS ÷ k) ÷ [SSE ÷ (n − k − 1)], testing whether all the slopes are zero.

Where you will meet it

F-statistic appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain what a simple linear regression's ANOVA table and F-statistic tell you
  CFA Level I · Quantitative Methods

  “The F-statistic, MSR / MSE, tests whether the slope is zero; if it exceeds the critical value the null is rejected.”

• Judge how much of the variation in the explained variable a multiple regression captures, using ANOVA output and goodness-of-fit statistics
  CFA Level II · Quantitative Methods

  “The overall F-statistic is (RSS ÷ k) ÷ [SSE ÷ (n − k − 1)] and tests whether all slopes are zero together.”

See also

Test statistic · Variance

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with F · Glossary