Regression Analysis: Random Selection
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The expense ratio of a mutual fund measures the percentage of the fund's assets used to pay for annual administrative overhead. Funds with higher ratios spend more of the fund's return to operate the fund. A random selection of 16 stock mutual funds last year revealed the following data:
Expense Ratio, X
0.62
1.21
1.03
0.67
0.40
1.12
0.78
0.47
0.85
0.92
0.57
0.95
0.20
1.00
1.15
1.03
Total Return, Y
34.3
33.0
31.4
31.8
32.9
27.6
30.3
31.9
33.8
27.9
32.6
24.3
34.3
31.7
29.9
34.7
-Construct a scatter plot of the data. Clearly label each axis.
-Take the scatter plot created earlier and draw the least squares line on it.
-Find the equation for the least squares line of best fit.
-State the values of the regression coefficients (intercept and slope) and interpret what they mean. Does expense hurt or help the fund's return?
-Based on your regression analysis of the data, when is the average total return for a mutual fund with an expense ratio of 0.75%?
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Solution Summary
A regression analysis for random selections are examined.
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Random Selection
The expense ratio of a mutual fund measures the percentage of the fund's assets used to pay for annual administrative overhead. Funds with higher ratios spend more of the fund's return to operate the fund. A random selection of 16 stock mutual funds last year revealed the following data:
Expense Ratio, X Total ...
Purchase this Solution
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