Elena Vasileva recently joined EnergyInvest as a junior portfolio analyst. Vasileva’s supervisor asks her to evaluate a potential investment opportunity in Amtex, a multinational oil and gas corporation based in the United States. Vasileva’s supervisor suggests using regression analysis to examine the relation between Amtex shares and returns on crude oil.

Vasileva notes the following assumptions of regression analysis:

Assumption 1. The error term is uncorrelated across observations.
Assumption 2. The variance of the error term is the same for all observations.
Assumption 3. The dependent variable is normally distributed.

Vasileva runs a regression of Amtex share returns on crude oil returns using the monthly data she collected. Selected data used in the regression are presented in Exhibit 1, and selected regression output is presented in Exhibit 2. She uses a 1 percent level of significance in all her tests.


Exhibit 1:

Selected Data for Crude Oil Returns and Amtex Share Returns







Oil Return
(Xi)
Amtex Return
(Yi)
Cross-Product
(Xi−X⎯⎯⎯)(Yi−Y⎯⎯⎯)








Predicted Amtex Return
(Yˆi






)
Regression Residual
(Yi−Yˆi






)
Squared Residual
(Yi−Yˆi)2
















Month 1
−0.032000
0.033145
−0.000388
0.002011
−0.031134
0.000969


⁝
⁝
⁝
⁝
⁝
⁝
⁝


Month 36
0.028636
0.062334
0.002663
0.016282
−0.046053
0.002121


Sum


0.085598


0.071475


Average
−0.018056
0.005293










Exhibit 2:

Selected Regression Output, Dependent Variable: Amtex Share Return







Coefficient
Standard Error




Intercept
0.0095
0.0078


Oil return
0.2354
0.0760




Critical t-values for a 1 percent level of significance:

One-sided, left side: −2.441
One-sided, right side: +2.441
Two-sided: ±2.728

Vasileva expects the crude oil return next month, Month 37, to be −0.01. She computes the standard error of the forecast to be 0.0469.





Question


Q. Based on Exhibit 1, the standard error of the estimate is closest to: