Instruction 12-7
an Investment Specialist Claims That If One Holds

question 130

Multiple Choice

Instruction 12-7
An investment specialist claims that if one holds a portfolio that moves in opposite direction to the market index like the All Ordinaries Index,then it is possible to reduce the variability of the portfolio's return.In other words,one can create a portfolio with positive returns but less exposure to risk.A sample of 26 years of the All Ordinaries index and a portfolio consisting of stocks of private prisons,which are believed to be negatively related to the All Ordinaries index,is collected.A regression analysis was performed by regressing the returns of the prison stocks portfolio (Y) on the returns of All Ordinaries index (X) to prove that the prison stocks portfolio is negatively related to the All Ordinaries index at a 5% level of significance.The results are given in the following Microsoft Excel output.
$$\begin{array} { | l | r | r | r | r | } \hline & \text { Coefficients } & \text { Standard Error } & \text { T Stat } & { \text { P-value } } \\\hline \text { Intercept } & 4.866004258 & 0.35743609 & 13.61363441 & 8.7932 \mathrm { E } - 13 \\\hline \mathrm { S } \& \mathrm { P } & - 0.502513506 & 0.071597152 & - 7.01862425 & 2.94942 \mathrm { E } - 07 \\\hline\end{array}$$
-Referring to Instruction 12-7,to test whether the prison stocks portfolio is negatively related to the All Ordinaries index,the appropriate null and alternative hypotheses are,________ respectively,

• A)H₀: ? ? 0 versus H₁: ? < 0
• B)H₀: ? ? 0 versus H₁: ? > 0
• C)H₀: r ? 0 versus H₁: r > 0
• D)H₀: r ? 0 versus H₁: r < 0

---

Definitions:

Population Standard Deviation

A measure of the dispersion or variability within a full population data set.

Raw Scores

The original, unmodified scores obtained in any assessment without adjustments or transformations.

Normally Distributed

Describes a probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Normally Distributed

Describes a distribution of data that follows a bell-shaped curve, where most of the data points are close to the mean.