A Sample of 200 Monthly Observations Is Used to Run

question 21

Multiple Choice

A sample of 200 monthly observations is used to run a simple linear regression: Returns = β₀ + β₁ Leverage + ε. A 5% level of significance is used to study if leverage has a significant influence on returns. The value of the test statistic for the regression coefficient of Leverage is calculated as t₁₉₈ = -1.09, with an associated p-value of 0.2770. The correct decision is to ________.

• A) reject the null hypothesis; we can conclude that leverage significantly explains returns
• B) reject the null hypothesis; we cannot conclude that leverage significantly explains returns
• C) not reject the null hypothesis; we cannot conclude that leverage significantly explains returns
• D) not reject the null hypothesis; we can conclude that leverage significantly explains returns

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Definitions:

Market Supply Curve

A graphical representation showing the quantity of goods that sellers are willing and able to sell at different prices.

Individual Supply Curves

Graphs that depict the relationship between the price of a good and the quantity supplied by an individual producer.

Quantity Supplied

The measure of a good or service that firms are eager and prepared to distribute at an established price throughout a set period.

Quantity Demanded

The total amount of a good or service that consumers are willing to buy at a given price in a given time period, holding all other factors constant.