Ridham Kamath, CFA, is an equity analyst with Morgan Yelnats India Ltd. The firm

Question

Ridham Kamath, CFA, is an equity analyst with Morgan Yelnats India Ltd. The firm has more than $10 billion of assets under management. Kamath also contributes quantitative analysis for asset valuation. Raj Sundara, portfolio manager for Morgan Yelnats, approaches Kamath. Raj asks Kamath to compute the CAPM beta for OXIN Leisure, an Indian multiplex holder. Kamath collects monthly returns for the last 5 years for OXIN Leisure and S&P; CNX Index. The results of the regression are as follows: Regression Statistics Observations 60 Since there are 60 observations and 1 independent variable, there are 58 degrees of freedom. Note: The t-distribution critical value at the 5% significance level for a two-tailed test is 2.002. Coefficient Standard Error Intercept 0.0851 0.0525 Beta 0.7826 0.1384 At 0.05 level of significance, the most appropriate conclusion that can be drawn from the regression result is: A Only beta is significant B Only the regression intercept is significant C Both the regression intercept and beta are significant

Explanation / Answer

here for critical value t=2.002

test statistic for beta t=(coefficeint/std error)=0.7826/0.1384=5.65

test statistic for intercept t=(coefficeint/std error)=0.0851/0.0525=1.62

as test statistic for beta is only higher than critical value; therfore only beta is signifcant

option A is correct

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