Answered step by step
Verified Expert Solution
Question
1 Approved Answer
During the 1 9 9 0 s , investors made investment decisions based on market performance. As the nature of investing shifted ( more day
During the s investors made investment decisions based on market performance. As the nature of investing shifted more day traders and faster flow of information using technology the relationship between market performance Return in percent and money flowing Flow into mutual funds $ million shifted. The least squares linear regression is shown below. Complete parts a through You may assume that the assumptions and conditions for regression are met.
widehat Flow Return
aInterpret the intercept in the linear model. Choose the correct answer below.
A The intercept is the actual value of the money Flow if the Return was
B The intercept is the predicted value of the Return if the money Flow was $
C The intercept is the predicted value of the money Flow if the Return was
D The intercept is the actual value of the Return if the money Flow was $
bInterpret the slope in the linear model. Choose the correct answer below.
A Fund Return increases by $ million for every increase in money Flow.
B Money Flow increases by $ million for every decrease in fund Return.
C Money Flow increases by $ million for every increase in fund Return.
D Fund Return increases by $ million for every decrease in money Flow.
c What is the predicted fund Flow for a month that had a market Return of
The predicted fund Flow is $ million.
d If during this month, the recorded fund Flow was $ billion, what is the residual using this linear model? Did the model provide an underestimate or overestimate for this month?
for this month.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started