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

Activity Based Costing, Activity Based Costing, Accounting Traditional cost...

Activity Based Costing, Accounting Traditional cost accounting has been based on allocating a subjective or calculated range of indirect expenses to direct costs. Activity Based Co

Number of faults to line length, A study on the occurrence of line faults i...

A study on the occurrence of line faults in an electricity supply network was carried out over a two-year period.  Data was collected from six regions on the number of faults per y

Help with Stats Homework!, Identify the unit of analysis in the following h...

Identify the unit of analysis in the following hypothetical research design: A research team wants to compare the school spirit at college campuses across the country to see if pri

Accounts payable in accounting, Volumes due to personal individuals or comp...

Volumes due to personal individuals or companies for products and/or services obtained by the state. Records Due does not involve amounts due to other companies, resources, or othe

#13, A survey showed that 80% of the 1600 adult respondents believe in glob...

A survey showed that 80% of the 1600 adult respondents believe in global warming. Construct a 95% confidence interval estimate of the proportion of adults believing in global warmi

Karl Pearsons, ). Calculate Karl Pearson’s coefficient of correlation from...

). Calculate Karl Pearson’s coefficient of correlation from the following data , using 20 as the working mean for price and 70 as the working mean for demand: Price: 14 16 17 18 1

Cost control, how to make assignment maintenance cost control

how to make assignment maintenance cost control

Statistics, The amount of time it takes the IRS to send a refund to taxpaye...

The amount of time it takes the IRS to send a refund to taxpayers is normally distributed with a mean of 12 weeks and a standard deviation of 3 weeks. What proportion of the taxpay

Regression analysis, Data was gathered on a group of ninth grade students. ...

Data was gathered on a group of ninth grade students. Some students have been diagnosed with a learning disability.  All students were measured on conduct, attention, hyperactivity

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

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