User Account

All Pages

Simple Linear Regression, Basic Statistics

Assignment Help:
One measure of the risk or volatility of an individual stock is the standard deviation of the total return (capital appreciation plus dividends) over several periods of time. Although the standard deviation is easy to compute, it does not take into account the extent to which the price of a given stock varies as a function of a standard market index, such as the S&P 500.As a result, many financial analysts prefer to use another measure of risk referred to as beta. Betas for individual stocks are determined by simple linear regression. The dependent variable is the total return for the stock and the independent variable is the total return for the stock market.* For this case problem we will use the S&P 500 index as the measure of the total return for the stock market, and an estimated regression equation will be developed using monthly data. The beta for the stock is the slope of the estimated regression equation (b1). The data contained in the file named Beta provides the total return (capital appreciation plus dividends) over 36 months for eight widely traded common stocks and the S&P 500.The value of beta for the stock market will always be 1; thus, stocks that tend to rise and fall with the stock market will also have a beta close to 1. Betas greater than 1 indicate that the stock is more volatile than the market, and betas less than 1 indicate that the stock is less volatile than the market. For instance, if a stock has a beta of 1.4, it is 40% more volatile than the market, and if a stock has a beta of .4, it is 60% less volatile than the market.

You have been assigned to analyze the risk characteristics of these stocks. Prepare a report that includes but is not limited to the following items.

a. Compute descriptive statistics for each stock and the S&P 500. Comment on your results. Which stocks are the most volatile?

b. Compute the value of beta for each stock. Which of these stocks would you expect to perform best in an up market? Which would you expect to hold their value best in adown market?

c. Comment on how much of the return for the individual stocks is explained by the market

Related Discussions:- Simple Linear Regression

What is their payout ratio?, The Equity accounts of Blydskap Ltd are shown ...

The Equity accounts of Blydskap Ltd are shown below: Ordinary Share Capital (R2 par value)                  R200 000 Share Premium

Conceptual structure of financial, conceptual structure of financial In...

conceptual structure of financial In financial accounting, There were many breaks in the conceptual structure of individual forums for example both the forums hadn't conducted

International accounting standards committee, IASC:  The IASC (Internationa...

IASC:  The IASC (International Accounting Standards Committee is an international organization which was set up in 1973 was restructured to form IASB in 2001. It was an agreement b

Description statistics, Ask question #Minim um 100 words accepted#

Ask question #Minim um 100 words accepted#

Hypothesis, What is a hypothesis test? Why do we need to use them to make ...

What is a hypothesis test? Why do we need to use them to make decisions about relating sample results to the population; why can’t we just make our decisions by the sample value?

Bank reconcillation, how to reconcile bank statement

how to reconcile bank statement

Budgeting, What is the basis for factory overhead absorption

What is the basis for factory overhead absorption

The correlation coefficient to identify collocations, Would there be a poss...

Would there be a possibility to use the correlation coefficient to identify collocations? Compare with the Chi2 test. • How could we maybe do that?

Elementary statistics, a few problems

a few problems

Journal entries on perpetual inventory system, I have to set up a chart for...

I have to set up a chart for a perpetual system. How Do I do this with credit card sales?

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd