The Following Regression Output Was Generated Based on a Sample

question 111

Multiple Choice

The following regression output was generated based on a sample of utility customers.The dependent variable was the dollar amount of the monthly bill and the independent variable was the size of the house in square feet. Based on this regression output,which of the following statements is not true?

• A)The number of square feet in the house explains only about 2 percent of the variation in the monthly power bill.
• B)At an alpha level equal to 0.05,there is no basis for rejecting the hypothesis that the slope coefficient is equal to zero.
• C)The average increase in the monthly power bill is about 66.4 for each additional square foot of space in the house.
• D)The correlation of the monthly power bill with the square footage of the house is 0.149

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Definitions:

Fama and French

Two economists known for their research on the factors that influence stock returns, notably the three-factor model which includes market risk, size, and value factors in explaining stock returns.

Multifactor Model

A financial model that evaluates securities by considering multiple economic and financial factors to explain asset prices and predict investment returns.

Market Index

A statistical measure that tracks the performance of a specific basket of stocks representing a particular market or sector.

Arbitrage Opportunity

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another market to make a risk-free profit.