The analyst tells you that the returns on its shares in company XYZ have no systematic risk, in other words that the returns on its shares are completely unrelated to movements in the market. The value of beta and its standard error are calculated to be 0.428 and 0.372, respectively. The model is estimated over 76 observations. Write down the null and alternative hypothesis Test this null hypothesis against a two–sided alternative at 5% level of significance Form and interpret a 95% and 99% confidence interval for beta
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
The analyst tells you that the returns on its shares in company XYZ have no systematic risk, in other words that the returns on its shares are completely unrelated to movements in the market. The value of beta and its standard error are calculated to be 0.428 and 0.372, respectively. The model is estimated over 76 observations.
- Write down the null and alternative hypothesis
- Test this null hypothesis against a two–sided alternative at 5% level of significance
- Form and interpret a 95% and 99% confidence interval for beta.
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