Q6. An analyst is trying to determine whether fund return performance is persistent. The analyst divides funds into three groups based on whether their return performance was in the top third (group 1), middle third (group 2), or bottom third (group 3) during the previous year. The manager then creates the following equation: R = a + b1D1 + b2D2 + b3D3 + ε, where R is return premium on the fund (the return minus the return on the S& 500 benchmark) and Di is equal to 1 if the fund is in group i. Assuming no other information, this equation will suffer from:
A) heteroskedasticity. B) serial correlation. C) collinearity.
Q7. Suppose the analyst wants to add a dummy variable for whether a person has an undergraduate college degree and a graduate degree. What is the correct representation if a person has both degrees? Undergraduate Degree Graduate Degree Dummy Variable Dummy Variable A) 1 1 B) 0 0 C) 0 1
Q8. The amount of the State of Florida’s total revenue that is allocated to the education budget is believed to be dependent upon the total revenue for the year and the political party that controls the state legislature. Which of the following regression models is most appropriate for capturing the effect of the political party on the education budget? Assume Yt is the amount of the education budget for Florida in year t, X is Florida’s total revenue in year t, and Dt = {1 if the legislature has a Democratic majority in year t, 0 otherwise}.
A) Yt = b1Dt + b2Xt + et.
B) Yt = b0 + b1Dt + et.
C) Yt = b0 + b1Dt + b2Xt + et.
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发表于 2009-1-8 14:28
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