Financial Risk Manager Part 1

The standard error of the slope coefficient β̂ is calculated using the formula:

$SEE_{\beta} = \sqrt{\frac{s^2}{n \times \hat{\sigma}_x^2}}$

Where:

• $s^2 = 20.45$ (estimated variance of the residuals)
• $\hat{\sigma}_x^2 = 18.65$ (estimated variance of the independent variable)
• $n = 10 \text{ years} \times 12 \text{ months/year} = 120$ (total number of observations)

Plugging in the values:

$SEE_{\beta} = \sqrt{\frac{20.45}{120 \times 18.65}} = \sqrt{\frac{20.45}{2238}} = \sqrt{0.009138} = 0.0956$

The intercept (β̂₀ = 0.65) and mean of x (μ̂ₓ = 0.61) are not needed for this calculation. The correct answer is 0.0956.