Answer: Test statistic = 9.310; DB regression coefficient is statistically different from zero

**Explanation:** We are testing the following hypothesis: H₀: DB = 0 vs H₁: DB ≠ 0 **Test Statistic Calculation:** The test statistic is calculated as: \[ t = \frac{\text{Coefficient}}{\text{Standard Error}} = \frac{0.27}{0.029} = 9.310 \] **Degrees of Freedom:** Number of observations (n) = 43 Number of independent variables (k) = 2 (DB and YC) Degrees of freedom = n - k - 1 = 43 - 2 - 1 = 40 **Critical Value:** For a two-tailed test at 5% significance level with 40 degrees of freedom: t₀.₀₂₅,₄₀ = 2.021 **Decision Rule:** Since the test statistic (9.310) is greater than the critical value (2.021), we reject the null hypothesis. **Conclusion:** The DB regression coefficient is statistically different from zero at the 5% level of significance. **Why other options are incorrect:** - **A**: Uses the critical value (2.021) as the test statistic - **C**: Incorrectly calculates the test statistic (0.27/0.029 ≠ 0.018) - **D**: While it has the correct test statistic, the conclusion "has little effect on the returns of S&P 500" is incorrect - statistical significance doesn't necessarily imply economic significance, but the coefficient is statistically significant.

Author: Nikitesh Somanthe