TABLE 13-7 An Investment Specialist Claims That If One Holds a Portfolio

Multiple Choice

TABLE 13-7
An investment specialist claims that if one holds a portfolio that moves in the opposite direction to the market index like the S&P 500, 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 S&P 500 index and a portfolio consisting of stocks of private prisons, which are believed to be negatively related to the S&P 500 index, is collected. A regression analysis was performed by regressing the returns of the prison stocks portfolio (Y) on the returns of S&P 500 index (X) to prove that the prison stocks portfolio is negatively related to the S&P 500 index at a 5% level of significance. The results are given in the following Excel output.

Note: 2.94942E-07 = 2.94942*10⁻⁷
-Referring to Table 13-7, to test whether the prison stocks portfolio is negatively related to the S&P 500 index, the measured value of the test statistic is

A) -7.019.
B) -0.503.
C) 0.072.
D) 0.357.