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Exercise

Interpretation of the hypothesis test for correlation

Still consider the constant expected return model (CER) that was introduced in exercise 2. Test for \(\rho_{VBLTX, SBUX}\):

$$H_0: \rho_{\mathrm{VBLTX}, \mathrm{SBUX}} = 0 \text{ vs. } H_1: \rho_{\mathrm{VBLTX}, \mathrm{SBUX}} \neq 0,$$ using a 5% significance level.

Can you reject the null hypothesis that the correlation between the returns of VBLTX and SBUX is equal to zero?

Note that the all_returns zoo object is preloaded in your workspace.

Instructions

50 XP

Possible answers