An Investment Analyst Wants to Examine the Relationship Between a Mutual

question 8

Essay

An investment analyst wants to examine the relationship between a mutual fund's return,its turnover rate,and its expense ratio.She randomly selects 10 mutual funds and estimates: Return = β₀ + β₁Turnover + β₂Expense + ε,where Return is the average five-year return (in %),Turnover is the annual holdings turnover (in %),Expense is the annual expense ratio (in %),and ε is the random error component.A portion of the regression results is shown in the accompanying table. a.At the 10% significance level,are the explanatory variables jointly significant in explaining Return? Explain.
b.At the 10% significance level,is each explanatory variable individually significant in explaining Return? Explain.

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Definitions:

Appraisers

Professionals who assess the value of properties, artworks, antiques, and other items of value.

Degrees Of Freedom

The number of independent values in a statistical calculation that are free to vary when estimating some parameter.

Interaction

In statistics, the way two or more variables are related in such a manner that the effect of one variable on an outcome is dependent on the level or value of another variable.

Significance Level

A threshold in hypothesis testing used to determine if the null hypothesis should be rejected, commonly denoted as alpha (α).