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Quants- Forecasting return

Intercept coefficient- 0.148923

large cap index- 1.205602

If the large capitalization index has a 10% return, then the forecast of the fund’s return will be:

A) 16.1.

B) 13.5.

C) 12.2.


The forecast is 12.209 = 0.149 + 1.206 × 10, so the answer is 12.2.

My question is when to take input as a % and when to take decimal? In this example, they used a % form. However, most of the times I have seen input in a decimal form.

Can someone please clarify. Thanks.

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There’s no definitive answer to this.

It’s however the person who created the model chose to do it.

Finance types are notorious for dropping percent signs for no good reason.

Simplify the complicated side; don't complify the simplicated side.

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