Wilshire 5000. In Chapter 16, Exercise 41 considered the relationship between the Wilshire 5000 Total Market Return and the amount of money flowing into and out of mutual funds (fund flows) monthly from January 1990 through October of 2002. The data file included data on the unemployment rate in each of the months. The original model looked like this.

a) Interpret the coefficient of the Unemployment Rate.

b) The t-ratio for the Unemployment Rate is negative.
Explain why.

c) State and complete the standard hypothesis test for the Unemployment Rate.

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Dependent variable is: Fund_Flows R squared 17.9% R squared (adjusted) = 17.3% s = 10999 with 154-2 = 152 degrees of freedom Source Regression Sum of Squares df Mean Square F-ratio 4002044231 Residual 18389954453 1 4002044231 33.1 152 120986542 Variable Coeff SE (Coeff) t-ratio P-value Intercept 9599.10 896.9 10.7 <0.0001 5.75 <0.0001 Wilshire 1156.40 201.1 Adding the Unemployment Rate to the model yields: Dependent variable is: Fund Flows R squared 28.8% R squared (adjusted) = 27.8% s = 10276 with 154 3 151 degrees of freedom Source Regression = Sum of Squares df Mean Square F-ratio 6446800389 Residual 15945198295 2 151 3223400194 30.5 105597340 Variable Coeff SE (Coeff) t-ratio P-value Intercept 30212.2 4365 6.92 0.0001 Wilshire 1183.29 187.9 6.30 <0.0001 Unemployment -3719.55 773.0 -4.81 <0.0001