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

Nucleus Composition, The study of radioactive disintegrations indicates the...

The study of radioactive disintegrations indicates the emission of alpha, beta and gamma particles/rays to be of nuclear origin. Further, study of artificial radioactivity has reve

Find value, what is the average value of 1,2,3,4,5

what is the average value of 1,2,3,4,5

Find the correlation coefficient, We find the correlation coefficient and p...

We find the correlation coefficient and plot the scatter plot using excel as follows:   Time in Waiting Room      Heart Rate

Estimate of the population mean time, The average cost per night of a hotel...

The average cost per night of a hotel room in New York City is $273 (SmartMoney, March 2009). Assume this estimate is based on a sample of 45 hotels and that the sample standard

Factor reversal test, formula for factor reversal test

formula for factor reversal test

Mean - median and frequencies, Put the appropriate summary statistics, e.g....

Put the appropriate summary statistics, e.g. mean, median, frequencies, percentages, for the different variables into a table to make them concise. You can see examples of consise

compare the quality of the different estimations, To illustrate the import...

To illustrate the importance of model selection. We will use only the first four observations to estimate the function f such that ini t. h = f(h. d) for two different models.

Rejection of null hypothesis - testing of hypothesis, Two researchers test ...

Two researchers test the same hypothesis. Researcher A rejects the null hypothesis and researcher B fails to reject the null hypothesis.  Discuss three reasons that could cause the

Cost, what is cost

what is cost

Measures of central tendency, MEASURES OF CENTRAL TENDENCY: 1) What do...

MEASURES OF CENTRAL TENDENCY: 1) What do you mean by the term "Statistics"? Also state the importance of statistics. 2) What is the difference between mean, median and mode

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