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In a Declining Market, Stock Index Futures Can Be Used

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In a declining market, stock index futures can be used to hedge a stock portfolio to help offset losses in the portfolio.


Definitions:

α

Typically used to denote the level of significance in hypothesis testing, representing the probability of rejecting a true null hypothesis or the threshold of rareness.

β

Often used to represent the slope coefficient in linear regression analysis, indicating the change in the dependent variable for a one-unit change in an independent variable.

Probability

The measure of the likelihood that a particular event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Critical Value

A threshold in hypothesis testing, which the test statistic must exceed in order to reject the null hypothesis, indicating a statistically significant result.

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