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

Components of time series, What are the components of time series? Bring ou...

What are the components of time series? Bring out the significance of moving average in analysing a time series and point out its limitations

Accounting Assumption, What are the consequences of non-compliance to each ...

What are the consequences of non-compliance to each accounting concepts?

Using a venn diagram evaluate the probability, Question: (a) 100 indiv...

Question: (a) 100 individuals applied for systems analyst positions with a large firm during the past year. 40 of them had some prior work experience (W), and 30 had a profes

Capitalization policy, Capitalization policy The criteria used to decide w...

Capitalization policy The criteria used to decide which capital outlays should be reported as capital assets on the whole state are financial statements,

Index number, How to solve problems of index number fixed based method

How to solve problems of index number fixed based method

Time series, Explain how you would decide whether to use the additive model...

Explain how you would decide whether to use the additive model or the multiplicative model to analyse a time series.

Analyze data in statistical procedure , Study A                            ...

Study A                                      Study B                       Study C x 2 = 1.683                    F = 7.357                    r = .83 df = 4

Differentiate between sample and population, Ask question #Midifferentiate ...

Ask question #Midifferentiate between sample and populationnimum 100 words accepted#

Limitation of the financial accounting, Limitation of the Financial Account...

Limitation of the Financial Accounting. There much limitation can be considered in case of the Financial Accounting but here we are discussing the main two limitations  It re

TIME SERIES, Graphical representation of freehand and semi average method

Graphical representation of freehand and semi average method

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