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