A Sample of 200 Monthly Observations Is Used to Run

question 65

Multiple Choice

A sample of 200 monthly observations is used to run a simple linear regression: Returns = β₀ + β₁ Leverage + ε.A five percent 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 ,with an associated p-value of 0.2770.The correct decision is to:

• A)Reject the null hypothesis and conclude that leverage significantly explains returns.
• B)Reject the null hypothesis and conclude that leverage does not significantly explain returns.
• C)Do not reject the null hypothesis and conclude that leverage does not significantly explain returns.
• D)Do not reject the null hypothesis and conclude that leverage significantly explains returns.

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Definitions:

Fallacy Of Logic

An error in reasoning that renders an argument invalid or undermines the argument's logical structure.

Ceteris Paribus

Ceteris paribus is a Latin phrase meaning "all other things being equal," used in economics to isolate the effect of one variable change in the study of a phenomenon.

Inductive Reasoning

A method of reasoning in which general conclusions are drawn from specific observations or instances, often used in scientific and philosophical contexts.

Single Factor

In economics, a variable or input that is considered in isolation to evaluate its impact on an outcome or process.