Kizspy | Question: 62
(Choose 1 answer)
(See picture)
A. (i)
B. (ii)
C. (iii)
D. (iv)
FUOVERFL
An investment specialist claims that if one holds a portfolio that moves in the opposite direction to the market index like the S&P 500, then it is possible to reduce the variability of the portfolio's return. In other words, one can create a portfolio with positive returns but less exposure to risk.A sample of 26 years of S&P 500 index and a portfolio consisting of stocks of private prisons, which are believed to be negatively related to the S&P 500 index, is collected. A regression analysis was performed by regressing the returns of the prison stocks portfolio (Y) on the returns of S&P 500 index (X) to prove that the prison stocks portfolio is negatively related to the S&P 500 index at a 5%level of significance. The results are given in the following EXCEL
output.
Coefficients
Standard Error
0.3574
0.0716
T Stat P-value 13.6136 0.0000
Intercept 4.8660
S&P
-0.5025
-7.0186 0.0000
To test whether the prison stocks portfolio is negatively related to the S&P 500 index, the appropriate null and alternative hypotheses are, respectively,
(ⅰ) H_{0}:\rho\ge0~vs.. 4_{1}:\rho<0
(ii) H_{0}:\rho\le0~vs. H_{1}:\rho>0
(iii) H_{0}:r\ge0~vs. H_{1}:r<0
(iv) H_{0}:r\le0~vs. I_{1}:r>0
