Tiffany & Co.has been the world's premier jeweler since 1837.The performance of Tiffany's stock is likely to be strongly influenced by the economy.Monthly data for Tiffany's risk-adjusted return and the risk-adjusted market return are collected for a five-year period (n = 60).The accompanying table shows the regression results when estimating the CAPM model for Tiffany's return. When testing whether the beta coefficient is significantly greater than one,the relevant critical value at the 5% significance level is t_0.05,58 = 1.672.The conclusion to the test is to _______________________________________________________________________________. A) reject H₀,and conclude that the return on Tiffany stock is riskier than the return on the market B) not reject H₀,and conclude that the return on Tiffany stock is riskier than the return on the market C) reject H₀,and conclude that the return on Tiffany stock is less risky than the return on the market D) not reject H₀,and conclude that the return on Tiffany stock is less risky than the return on the market

Question

Quizplus · Accepted Answer

The relevant critical value for testing whether the beta coefficient is significantly greater than one is 1.672 at the 5% significance level. If the test statistic is greater than the critical value, we reject the null hypothesis (H₀) and conclude that the return on Tiffany stock is riskier than the return on the market. This is because a beta greater than one indicates that the stock is more volatile than the market. Therefore, the conclusion to the test is to reject H₀ and conclude that the return on Tiffany stock is riskier than the return on the market.