Develop a regression model that would predict the djia

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Reference no: EM13580640

Tim Cooper plans to invest money in a mutual fund that is tied to one of the major market indices, either the S&P 500 or the Dow Jones Industrial Average. To obtain even more diversification, Tim has thought about investing in both of these. To determine whether investing in two funds would help, Tim decided to take 20 weeks of data and compare the two markets. The closing price for each index is shown in the table below:

WEEK

1

2

3

4

5

6

7

DMA

10,226

10,473

10,452

10,442

10,471

10,213

10,187

S&P

1,107

1,141

1,135

1,139

1,142

1,108

1,110

WEEK

8

9

10

11

12

13

14

DMA

10,240

10,596

10,584

10,619

10,628

10,593

10,488

S&P

1,121

1,157

1,145

1,144

1,146

1,143

1,131

WEEK

15

16

17

18

19

20

 

MIA

10,568

10,601

10,459

10,410

10,325

10,278

 

S&P

1,142

1,140

1,122

1,108

1,096

1,089

 

Develop a regression model that would predict the DJIA based on the S&P 500 index. Based on this model, what would you expect the DJIA to be when the S&P is 1,100? What is the correlation coefficient (r) between the two markets?

Reference no: EM13580640

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