Question

You want to develop a model to predict stock portfolio returns based on the Gross Domestic Product, the Consumer Price Index, the Dow Jones Industrial Average, and whether or not the portfolio is predominantly focused on growth or value. The correct statistical technique/test would be:

Chi-square

Correlation

One-tailed ttest

Two-tailed ttest

Simple linear regression

Multiple regression

Logistic regression

Dummy variable regression

ANOVA

One-way ANOVA

Answer 1

(i)To predict Stock Portfolio Returns based on Gross Domestic Product, Consumer Price Index, Dow Jones Industrial Average; Also (ii)to determine whether or not the portfolio is predominantly focused on growth or value.

Let Y denote the Stock Portfolio returns
Let X1 denote the Gross Domestic Product, X2 denote the Consumer Price Index and X3 denote the Dow Jones Industrial Average.

Since all of Y, X1, X2, X3 are continuous variables in nature both (i) and (ii) can be achieved by fitting a Multiple Linear Regression model of Y on X1, X2, X3.

The model can be given as where is a linear function of X1, X2 and X3.

The analysis of coefficients of the above model shall give us the answer to (ii) whereas the model itself shall give us (i)