Exhibit 20.10.SHY (NYSEARCA: SHY)is a 1-3 year Treasury bond fund which is considered to be a market neutral position.Using the S&P 500 as a benchmark and five years of monthly log-return data,the rank correlation coefficient of SHY with the S&P 500 is found to be . Refer to Exhibit 20.10.Using the p-value approach and ,the appropriate conclusion is:

Question

Exhibit 20.10.SHY (NYSEARCA: SHY)is a 1-3 year Treasury bond fund which is considered to be a market neutral position.Using the S&P 500 as a benchmark and five years of monthly log-return data,the rank correlation coefficient of SHY with the S&P 500 is found to be  . Refer to Exhibit 20.10.Using the p-value approach and  ,the appropriate conclusion is:

Quizplus · Accepted Answer

The p-value approach is used to test the null hypothesis that the population correlation coefficient is equal to zero against the alternative hypothesis that it is not equal to zero. If the p-value is less than the significance level (usually 0.05), we reject the null hypothesis and conclude that there is evidence of a non-zero correlation. If the p-value is greater than the significance level, we fail to reject the null hypothesis and cannot conclude that there is a non-zero correlation.

In this case, the p-value is 0.6948, which is greater than 0.05. Therefore, we fail to reject the null hypothesis and cannot conclude that there is a non-zero correlation between SHY and the S&P 500. Hence, the appropriate conclusion is that we do not reject the null hypothesis, and we cannot conclude the correlation coefficient is not zero. Therefore, the best choice is D.