Good evening Sir,
I did not understand this question. Options and explanations of the attached question is given here:
Options:
A . Long high beta securities and short value securities in months where treasury yields are high
B. Short high beta securities and long value securities in months subsequent to treasury yields being high
C. Long high beta securities and short value securities in months subsequent to treasury yields being high
Explanation:
The regression coefficients indicate there is a positive relationship between bond yields and returns to high beta securities in the subsequent month. Hence high beta securities should be bought the month after high treasury yields have been observed. There is a negative relationship between bond yields and returns to value securities in the subsequent month, hence value securities should be sold in the month after high treasury yields have been observed.
Could you please elaborate this to understand easily?
So, in this question we have 2 things regressed against each over time and see their behaviour for some inference.
Jaise, ki agar kisi month 10y treasury yield badhta hai ya high hota hai toh uske agle month high beta security/value security etc kaise return dete hai.
Now, isme in all three style returns, most significant move jisme ata hai us par focus krenge as uska behaviour significant lag rha.
Beta and value ka bars bade hai so significant move hota hai subsquent month mein jab treasury yields rise or high.
So, ab long beta as uska return is high and short value as uska return subsequent month mein negative hai.