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

Define overtime pay, Define Overtime Pay Extra time represents time wor...

Define Overtime Pay Extra time represents time worked in excess of 40 times weekly. Whether or not workers are bought overtime will depend on each worker's job obligations and

Survey statistics, #qa national poll of 1836 respondents indicated that 36%...

#qa national poll of 1836 respondents indicated that 36% support the NDP. Test whether this is sufficient evidence to show that the NDP support has increased since the election. Us

Royalty accounts, Ritu acquired a mine on lease from Richa for a period of ...

Ritu acquired a mine on lease from Richa for a period of 8 years at a royalty of ` 60 per tonne of coal produced subject to minimum rent of ` 1,00,000 for the first year, increasin

How long it takes a ball to fall to the bottom of a cone, A game that frien...

A game that friends and I try to play to guess how long it takes a ball to fall to the bottom of a cone and how many revolutions around the cone it will take. I do not have a lot

Assingment, #question:how cost classification can helpful for planning, con...

#question:how cost classification can helpful for planning, controlling and decision making

Bond calculation, Calculate the original price of the bond. Bonds were issu...

Calculate the original price of the bond. Bonds were issued at $200,000 of x% ten-year term bond at an effective annual interest rate (market rate) of x%. The bonds pay interest se

Strategy management , assignment.

assignment.

Audit, hi i need help for an auditing assignment

hi i need help for an auditing assignment

Regression analysis, Regression line drawn as Y=C+1075x, when x was 2, and ...

Regression line drawn as Y=C+1075x, when x was 2, and y was 239. Given that y intercept was 11. Calculate the residual

Financial, on july 2,ali collected cash of Rs 700 from accounts receivable ...

on july 2,ali collected cash of Rs 700 from accounts receivable ,july 9 purchased gym equipments for 2175, paying 5500 in cash and charging the remainder on the company 30 day acco

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