# Question: A portion of a data set containing information for 45

A portion of a data set containing information for 45 mutual funds that are part of the Morningstar Funds 500 for 2008 follows. The complete data set is available in the file named MutualFunds. The data set includes the following five variables:

Fund Type: The type of fund, labeled DE (Domestic Equity), IE (International Equity), and FI (Fixed Income).

Net Asset Value ($): The closing price per share on December 31, 2007.

5-Year Average Return (%): The average annual return for the fund over the past five years.

Expense Ratio (%): The percentage of assets deducted each fiscal year for fund expenses.

Morningstar Rank: The risk adjusted star rating for each fund; Morningstar ranks go from a low of 1-Star to a high of 5-Stars.

a. Develop an estimated regression equation that can be used to predict the 5-year average return given the type of fund. At the .05 level of significance, test for a significant relationship.

b. Did the estimated regression equation developed in part (a) provide a good fit to the data? Explain.

c. Develop the estimated regression equation that can be used to predict the 5-year average return given the type of fund, the net asset value, and the expense ratio. At the .05 level of significance, test for a significant relationship. Do you think any variables should be deleted from the estimated regression equation? Explain.

d. Morningstar Rank is a categorical variable. Because the data set contains only funds with four ranks (2-Star through 5-Star), use the following dummy variables: 3Star-Rank = 1 for a 3-Star fund, 0 otherwise; 4StarRank = 1 for a 4-Star fund, 0 otherwise; and 5Star Rank = 1 for a 5-Star fund, 0 otherwise. Develop an estimated regression equation that can be used to predict the 5-year average return given the type of fund, the expense ratio, and the Morningstar Rank. Using Î± = .05, remove any independent variables that are not significant.

e. Use the estimated regression equation developed in part (d) to predict the 5-year average return for a domestic equity fund with an expense ratio of 1.05% and a 3-Star MorningstarRank.

Fund Type: The type of fund, labeled DE (Domestic Equity), IE (International Equity), and FI (Fixed Income).

Net Asset Value ($): The closing price per share on December 31, 2007.

5-Year Average Return (%): The average annual return for the fund over the past five years.

Expense Ratio (%): The percentage of assets deducted each fiscal year for fund expenses.

Morningstar Rank: The risk adjusted star rating for each fund; Morningstar ranks go from a low of 1-Star to a high of 5-Stars.

a. Develop an estimated regression equation that can be used to predict the 5-year average return given the type of fund. At the .05 level of significance, test for a significant relationship.

b. Did the estimated regression equation developed in part (a) provide a good fit to the data? Explain.

c. Develop the estimated regression equation that can be used to predict the 5-year average return given the type of fund, the net asset value, and the expense ratio. At the .05 level of significance, test for a significant relationship. Do you think any variables should be deleted from the estimated regression equation? Explain.

d. Morningstar Rank is a categorical variable. Because the data set contains only funds with four ranks (2-Star through 5-Star), use the following dummy variables: 3Star-Rank = 1 for a 3-Star fund, 0 otherwise; 4StarRank = 1 for a 4-Star fund, 0 otherwise; and 5Star Rank = 1 for a 5-Star fund, 0 otherwise. Develop an estimated regression equation that can be used to predict the 5-year average return given the type of fund, the expense ratio, and the Morningstar Rank. Using Î± = .05, remove any independent variables that are not significant.

e. Use the estimated regression equation developed in part (d) to predict the 5-year average return for a domestic equity fund with an expense ratio of 1.05% and a 3-Star MorningstarRank.

**View Solution:**## Answer to relevant Questions

The U.S. Department of Energy provides fuel economy information for a variety of motor vehicles. A sample of 10 automobiles is shown in Table 1.6 (Fuel Economy website, February 22, 2008). Data show the size of the ...A random telephone survey of 1021 adults (aged 18 and older) was conducted by Opinion Research Corporation on behalf of CompleteTax, an online tax preparation and e-filing service. The survey results showed that 684 of those ...The Nielsen Company surveyed consumers in 47 markets from Europe, Asia-Pacific, the Americas, and the Middle East to determine which factors are most important in determining where they buy groceries. Using a scale of 1 ...The Canmark Research Center Airport Customer Satisfaction Survey uses an online questionnaire to provide airlines and airports with customer satisfaction ratings for all aspects of the customersâ€™ flight experience (airport ...Fortune magazine publishes an annual list of the 100 best companies to work for. The data in the file named FortuneBest shows a portion of the data for a random sample of 30 of the companies that made the top 100 list for ...Post your question