Which of the following statements about the linear regression of the return of a portfolio over the return of its benchmark presented below are correct?
|
Portfolio Parameter
|
Value
|
|
Beta
|
1.25
|
|
Alpha
|
0.26
|
|
Coefficient of determination
|
0.66
|
|
Standard deviation of error
|
2.42
|
I. The correlation is 0.71.
II. About 34% of the variation in the portfolio return is explained by variation in the benchmark return.
III. The portfolio is the dependent variable.
IV. For an estimated portfolio return of 12%, the confidence interval at 95% is (7.16% - 16.84%).
a. II and IV
b. III and IV
c. I, II, and III
d. II, III, and IV