SCENARIO 13-7 an Investment Specialist Claims That If One Holds

question 99

Multiple Choice

SCENARIO 13-7 An investment specialist claims that if one holds a portfolio that moves in the opposite direction to the market index like the 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 i ndex and a portfolio consisting of stocks of private prisons, which are believed to be negatively related to the S&P 500 inde x, 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.
-Referring to Scenario 13-7, to test whether the prison stocks portfolio is negatively related to the S&P 500 index, the measured value of the test statistic is

• A)-7.019
• B)-0.503
• C)0.072
• D)0.357

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Definitions:

Methadone

A synthetic opioid used medically both as a pain reliever and in the treatment of opioid addiction.

Endorphins

Naturally occurring chemicals in the body that not only alleviate pain but also enhance sensations of joy.

Opiate

A category of drugs derived from the opium poppy (or synthetic analogs) that primarily act as central nervous system depressants and are used for pain relief.

Amphetamines

Drugs (such as methamphetamine) that stimulate neural activity, causing accelerated body functions and associated energy and mood changes.