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

Assignment, How to order an assignment?

How to order an assignment?

How to calculate mean?, Mean The mean is commonly the most significant ...

Mean The mean is commonly the most significant of all the numerical measurements used to describe data, and it is what the most people call an average. Example  Find

Eye, the near point of hypermetropic person is 75cm if the person uses eyeg...

the near point of hypermetropic person is 75cm if the person uses eyeglasses having power +1.0 D,calculate the distance of distinct vision

Standard costing, Standard costing In contemporary price sales, the idea...

Standard costing In contemporary price sales, the idea of documenting traditional expenditures was taken further, by assigning the organization''s set expenditures over a given

Employer''s fica tax rate for 2012, Employer's FICA tax rate for 2012 Th...

Employer's FICA tax rate for 2012 The employer's FICA tax amount for 2012 involves 1) the Public Protection tax amount of 6.2% of each individual's first $110,100 of income, inc

Financial accounting about Collison (1998:7), if "profit" maximisation is b...

if "profit" maximisation is biased towards maximising the interest of only one stakeholder group, would you expect that over time there will be less emphasis on profit and more emp

Linear modelling, what is a difference between a linear model and a linear ...

what is a difference between a linear model and a linear model

Accounting rate of return, Ghosh Ltd is considering expanding its business ...

Ghosh Ltd is considering expanding its business and has to decide between taking on Project A or Project B. Both projects have a life of four years. Equipment is expected to have

IFRS 9, The company acquired 50000 8% preferencd shares (with a par value o...

The company acquired 50000 8% preferencd shares (with a par value of R4 each) in cross limited on 30 june 2006 for R180000.transaction costs at the acquisition date amounted to R12

Homogeneity, Let f (?) be the production function associated with a single-...

Let f (?) be the production function associated with a single-output technology, and let Y be the production set. Show that Y satisfies constant returns to scale if and only if f (

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