Kizspy | Question: 72
(Choose 1 answer)
(See picture)
A. (i)
B. (ii)
C. (iii)
D. (iv)
FOGUER 4DW.LOV
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
() 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.
Intercept
S&P
Coefficients
4.8660
-0.5025
Standard Error
0.3574
0.0716
T Stat P-value
13.6136 0.0000
-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) Hop≥0 vs. H₁: p<0
(ii) H. p≤0 vs. H₁: p>0
(iii) Hor≥0 vs. H₁: <0
(iv) Hor≤0 vs. H₁: >0
