Final answer:
True: The beta of a portfolio is correctly said to be the weighted average of the beta of its individual stocks. The significance test for the difference in weighted alpha between the banks in the Northeast and in the West would commonly involve a t-test at a 5 percent significance level.
Step-by-step explanation:
The statement that the beta of a portfolio is the weighted average of the betas of the individual stocks in that portfolio is True. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. To calculate the portfolio beta, you multiply the beta of each individual stock by its proportional weight in the portfolio, then sum up these products. It's a fundamental concept in portfolio management that is used to gauge how much risk the portfolio is exposed to market fluctuations.
To test whether there is a difference in the weighted alpha of the top 30 stocks of banks in the Northeast and in the West, one would typically apply statistical analysis. This might include comparing the mean weighted alphas of both sets using a t-test, assuming that the weighted alphas are normally distributed. We conducted this test at a 5 percent significance level to determine whether the observed difference in weighted alphas is statistically significant or could have occurred by random chance.