Xander Feng, CFA, is a quantitative analyst with Red Star Securities Ltd., a com
ID: 3370931 • Letter: X
Question
Xander Feng, CFA, is a quantitative analyst with Red Star Securities Ltd., a company based in Shanghai, China. Red Star provides stock brokering and investment advisory services to institutional investors. Extending its regular business, the firm also maintains equity and fixed income investment research teams. China National Oil Limited (CNOL) is a state-owned, giant oil exploration, refining and marketing company with a presence across east Asia. CNOL is planning to issue bonds with an 8-year maturity. Several of Red Star's investment clients have shown keen interest in subscribing to the issue. Feng starts working on a quantitative model to forecast changes in quarterly profit of CNOL based on macroeconomic variables. Th e regression model for is: where: ·?Profit-change in quarterly profit of CNOL ?GDP-change in quarterly GDP for China . ?FX = change in foreign exchange rate CNY/USD AInt- change in policy interest rate of Chinese central bank For the model to forecast change in profit of CNOL, regression results are as follows: Exhibit 1: Regression statistics for quarterly profit model R-squared 0.8921 Observations 48 SEE 0.7978 ANOVA Degrees of Freedom Regression 3 231.54 Residual44 Total 47 The value of the F-statistic for the model to forecast CNOL profit change is closest to: A 86 ? 121 C136Explanation / Answer
MS (Residual) = (SEE)2 = (0.7978)2 = 0.6365
Hence,
F - statistic = MS (Regression) / MS (Residual) = (231.54/3) / 0.6365 = 121
Option B is correct.
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