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An analyst is trying to understand the variation of portfolio returns, shown in the left column, by analyzing the variation o returns in the right column. Here, the analyst uses the benchmark returns as the explanatory variable, i.e., the x-variable variation of portfolio returns, the y -variable. The analyst performs a regression analysis between the x and y variables. The explanatory power, or the so-called R Squared, of this regression, is near 97%. This means O the regression model does a poor job of explaining the variation of the y-variable the regression model does a good job of explaining the variation of the y-variable O the regression model does a good job of explaining the variation of the x-variable O the regression model does a poor job of explaining the variation of the x-variable

An analyst is trying to understand the variation of portfolio returns, shown in the left column, by analyzing the variation o returns in the right column. Here, the analyst uses the benchmark returns as the explanatory variable, i.e., the x-variable variation of portfolio returns, the y -variable. The analyst performs a regression analysis between the x and y variables. The explanatory power, or the so-called R Squared, of this regression, is near 97%. This means O the regression model does a poor job of explaining the variation of the y-variable the regression model does a good job of explaining the variation of the y-variable O the regression model does a good job of explaining the variation of the x-variable O the regression model does a poor job of explaining the variation of the x-variable

Linear Algebra: A Modern Introduction
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter4: Eigenvalues And Eigenvectors
Section4.6: Applications And The Perron-frobenius Theorem
Problem 22EQ
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Portfolio Benchmark 22.00% 16.00% -7.50% -2.30% 8.63% 17.88% 21.25% -9.63% -3.88% 3.25% 9.15% 11.21% 6.25% -37.00% 15.00% 9.63% 15.25% 5.75% -42.00% 13.75% An analyst is trying to understand the variation of portfolio returns, shown in the left column, by analyzing the variation of benchmark returns in the right column. Here, the analyst uses the benchmark returns as the explanatory variable, i.e., the x-variable, to explain the variation of portfolio returns, the y -variable. The analyst performs a regression analysis between the x and y variables. The explanatory power, or the so-called R Squared, of this regression, is near 97%. This means the regression model does a poor job of explaining the variation of the y-variable the regression model does a good job of explaining the variation of the y-variable the regression model does a good job of explaining the variation of the x-variable the regression model does a poor job of explaining the variation of the x-variable
Transcribed Image Text:Portfolio Benchmark 22.00% 16.00% -7.50% -2.30% 8.63% 17.88% 21.25% -9.63% -3.88% 3.25% 9.15% 11.21% 6.25% -37.00% 15.00% 9.63% 15.25% 5.75% -42.00% 13.75% An analyst is trying to understand the variation of portfolio returns, shown in the left column, by analyzing the variation of benchmark returns in the right column. Here, the analyst uses the benchmark returns as the explanatory variable, i.e., the x-variable, to explain the variation of portfolio returns, the y -variable. The analyst performs a regression analysis between the x and y variables. The explanatory power, or the so-called R Squared, of this regression, is near 97%. This means the regression model does a poor job of explaining the variation of the y-variable the regression model does a good job of explaining the variation of the y-variable the regression model does a good job of explaining the variation of the x-variable the regression model does a poor job of explaining the variation of the x-variable
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