A Portfolio Manager Is Interested in Reducing the Risk of a Particular

question 35

Essay

A portfolio manager is interested in reducing the risk of a particular portfolio by including assets that have little, if any, correlation. He wonders whether the stock prices for the firms Apple and Google are correlated. As a very preliminary step, he collects the monthly closing stock price for each firm from January 2012 to April 2012. a. Compute the sample correlation coefficient.
B) Specify the competing hypotheses to determine whether the stock prices are correlated.
C) Calculate the value of the test statistic and approximate the corresponding p-value.
D) At the 5% significance level, what is the conclusion to the test? Explain.

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Definitions:

Reward

Benefits, compensation, or recognition given to employees in exchange for their work, performance, or a specific achievement.

Behavior

The way an individual or group responds or behaves in reaction to stimuli coming from outside or within.

Primary Reinforcer

An innately satisfying stimulus, such as food or comfort, that fulfills a basic biological need and does not require learning to be effective.

Reward

Any form of compensation, recognition, or benefit used to reinforce positive behavior and outcomes within an organization.