Deepika Jain, CFA is a quantitative analyst with Oasis Investment Rescarch Ltd.,

Question

Deepika Jain, CFA is a quantitative analyst with Oasis Investment Rescarch Ltd., a company providing investment analysis and advice through internet and phone contact with clientele spread across India. Oasis offers online investment rescarch through its website investmentor.com. Jain plans to publish a quantitative analysis of the New Pension Scheme (NPS) started hy the Indian government ahout seven years ago. Jain believes that NPS performance, measured in monthly returns, is largely influenced hy the following: (1) assets under management (AUM), (2) proportion of actively managed funds, (3) monthly returns of the S&P; CNXS0 Index (Nafty), a stnck index widely followed in India, and (4) the professional asset management experience of portfolio managers, in years. Jain uses monthly data for the last 6 years. Jain collects 72 ohservations when gathering data Here are descriptions of the variahles under consideration NPS monthly return of New Pension Scheme AUM-assets under management for the scheme measured as natural log of INR: millions Active proportion of actively managed funds Nifty-monthly return of the S≈ CNX S0 Index Exp- professional asset management experience of portfolio manager, measured as natural log of years The multiple regression model for NPS performance ts: NPS +B(AUM) +Aa(Active) B(Nifty) +B(Exp) With the help of modeling software, Jain generates the following regression statistics Regression statistics Coefficlent Standard error 0.005 0.0041 0.0159 1.015 AUM 0.005777 0.3011 ain further notes the following t distributiom table of critical valucs t-distrihution table Degrees of freedom (df) 61 62 Two-sided t-distrihution critical values 0.01 2.657 2.655 64 65 e6 67 69 2.652 2.650 Which ofthe following independent variables has an estimated coefficient that is not statistically significant at the 1% level? A Active B Nifty C Exp

Explanation / Answer

frm given table for (n-5=67) degree of freedom crtiical value t=2.651

for Active test statistic t=coefficient/std error =(0.0159/0.005096)=3.120

for Nifty test statistic t=coefficient/std error =(1.015/0.3011)=3.37

for Exp test statistic t=coefficient/std error =(0.00980/0.00380)=2.57

as test statistic is less than crtiical value for Exp

hence option C is correct

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