medium · FRM Part 1
A regression of a hedge fund's returns on five factors shows a VIF of 12 for the 'Value' factor.
How would you interpret the standard error for this factor's coefficient?
- The standard error is inflated by a factor of approximately 3.46 compared to if it were uncorrelated with other factors.
- The coefficient estimate is biased by a factor of 12.
- The standard error is 12 times larger than it should be.
- The t-statistic for the Value factor is 12 times smaller than it should be.
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