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4、In a recent analysis of salaries (in $1,000) of financial analysts, a regression of salaries on education, experience, and gender is run. Gender equals one for men and zero for women. The regression results from a sample of 230 financial analysts are presented below, with t-statistics in parenthesis.

Salaries = 34.98 + 1.2 Education + 0.5 Experience + 6.3 Gender

       (29.11)          (8.93)                (2.98)                (1.58)

What is the expected salary (in $1,000) of a woman with 16 years of education and 10 years of experience?

A) 54.98.

B) 61.28. 

C) 65.48.

D) 59.18.

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The correct answer is D

34.98 + 1.2(16) + 0.5(10) = 59.18

 

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Holding everything else constant, do men get paid more than women? Use a 5% level of significance. No, since the t-value:

A) exceeds the critical value of 1.65.

B) does not exceed the critical value of 1.65.

C) exceeds the critical value of 1.96.

D) does not exceed the critical value of 1.96.

lianai

 

The correct answer is B

H0: bgender ≤ 0

Ha: bgender > 0

t-value of 1.58 < 1.65 (critical value)

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5、Jacob Warner, CFA, is evaluating a regression analysis recently published in a trade journal that hypothesizes that the annual performance of the S& 500 stock index can be explained by movements in the Federal Funds rate and the U.S. Producer Price Index (PPI). Which of the following statements regarding his analysis is most accurate?

A) If the p-value of a variable is less than the significance level, the null hypothesis cannot be rejected.

B) If the p-value of a variable is less than the significance level, the null hypothesis can be rejected.

C) If the t-value of a variable is less than the significance level, the null hypothesis can be rejected.

D) If the t-value of a variable is less than the significance level, the null hypothesis cannot be rejected.

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The correct answer is B

The p-value is the smallest level of significance for which the null hypothesis can be rejected. Therefore, for any given variable, if the p-value of a variable is less than the significance level, the null hypothesis can be rejected and the variable is considered to be statistically significant.

 

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AIM 12: Define, calculate and interpret the adjusted coefficient of determination.

1、An analyst regresses the return of a S& 500 index fund against the S& 500, and also regresses the return of an active manager against the S& 500. The analyst uses the last five years of data in both regressions. Without making any other assumptions, which of the following is TRUE? The index fund:

A) should have a lower coefficient of determination.

B) should have a higher coefficient on the independent variable.

C) regression should have higher sum of squares regression as a ratio to the total sum of squares.

D) should have a higher total sum of squares.

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The correct answer is C

The index fund regression should provide a higher R2, which is the sum of squares regression divided by the total sum of squares.

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2、Which of the following statements regarding the R2 is FALSE?

A) The R2 of a regression will be greater than or equal to the adjusted-R2 for the same regression.

B) 0 ≤ R2 ≤ 1.0.

C) The F-statistic for the test of the fit of the model is the ratio of the mean squared regression to the mean squared error.

D) The R2 is the ratio of the unexplained variation to the explained variation of the dependent variable.

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The correct answer is D

The R2 is the ratio of the explained variation to the total variation.