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

Allowance for uncollectible , Allowance for uncollectible A contra-asset a...

Allowance for uncollectible A contra-asset assessment consideration used to indicate the part of a / r that is approximated to be uncollectible.

Sampling, what are the methods of sampling

what are the methods of sampling

Differance between categorical and dependent variable, Choose a topic that ...

Choose a topic that interests you that you can explore either with the 2006 GSS. You should have one primary "dependent" variable that you are interested in (Y). This variable shou

Geometric mean, 5,2,5,8,9,9,8,7,5,2

5,2,5,8,9,9,8,7,5,2

Regression Analysis, I have a regression analysis assignment using minicab,...

I have a regression analysis assignment using minicab, but I am not sue how to do with my current data set?

Benefits of the study of accounting, reasons for studying accounting

reasons for studying accounting

Compute the mean absolute deviation and mean square error, Toyota Motors in...

Toyota Motors introduced a hybrid car Hybrid G in the U.S. market in 2006. In the first three years, the sales of Hybrid G were strong due to the buzz surrounding the hybrid car co

Role of accountant, What are the roles of accountant, let me know the caree...

What are the roles of accountant, let me know the career opportunity in accounting subject?

Probability, The monthly income of a company employee is normally distribut...

The monthly income of a company employee is normally distributed with the mean Rs. 20,000 and standard deviation of Rs. 5000. a) Find the probability that an employee earns more th

Obtain the critical value for a hypothesis test, Obtain the critical value ...

Obtain the critical value (or values) for a hypothesis test for the mean if you conduct: (a) an upper tail "z" test at the 1% level of significance. (b) a two-tailed "z" test

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