A sample of 200 monthly observations is used to run a simple linear regression: Returns = β₀ + β₁ Leverage + ε. A 5% level of significance is used to study if leverage has a significant influence on returns. The value of the test statistic for the regression coefficient of Leverage is calculated as t₁₉₈ = -1.09, with an associated p-value of 0.2770. The correct decision is to ________. A) reject the null hypothesis; we can conclude that leverage significantly explains returns B) reject the null hypothesis; we cannot conclude that leverage significantly explains returns C) not reject the null hypothesis; we cannot conclude that leverage significantly explains returns D) not reject the null hypothesis; we can conclude that leverage significantly explains returns

Question

Quizplus · Accepted Answer

Since the p-value (0.2770) for the regression coefficient of leverage is greater than the level of significance (0.05), we fail to reject the null hypothesis. Therefore, we cannot conclude that leverage significantly explains returns.

A Sample of 200 Monthly Observations Is Used to Run