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

How would you go about choosing a random sample, Q. Suppose a study is bein...

Q. Suppose a study is being done and the population is the American public. How would you go about choosing a random sample population to phone for a survey? Solution: One w

Modules of probability and statistics, Question: (a) Suppose that 100 t...

Question: (a) Suppose that 100 tires made by Bridgestone last on average 21,819 miles with a standard deviation of 1,295 miles. Test the null hypothesis µ = 22, 000 miles again

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

What is portfolio ratio, Describe portfolio ratio, i need assignment help i...

Describe portfolio ratio, i need assignment help in portfolio ratio based questions.

Methods of determining trend in time series, methods of determining trend i...

methods of determining trend in time series

Confidence interval for a proportion, The quick method for a confidence int...

The quick method for a confidence interval for a proportion uses p ±1/√n as an approximation for a 95% confidence interval.  The margin of error in this case is slightly larger tha

Dr. s.n.de, uses of time series with example

uses of time series with example

Index number, Characteristics of index number

Characteristics of index number

What is accounting system , The methods and records established to recogniz...

The methods and records established to recognize, set up, evaluate, move, record, and report the state’s purchases and to maintain responsibility for its obligations and resources

What is a sole proprietorship, What is a sole proprietorship? A sole pr...

What is a sole proprietorship? A sole proprietorship is a form of business organization that is owned by one person. The owner is referred to as a sole proprietor. In accoun

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