Pay Someone To Do Homework

Simple leaner regression

Question In the CAPM model, B0 is the risk free rate of return and its value is expected to be positive (usually the Treasury bill). The slope, B1,is the beta coefficient in CAPM model and measures the volatility of an asset’s return compared to that of the overall market. The benchmark value is 1.0 (perfect slope). The value can be more than 1.0 to show that a stock is more responsive to market changes or simply riskier than the market. The value can be less than 1.0 which indicates that the stock is less responsive to market changes (or is less risky).
Question 2
The plotted trajectories of x and y are shown in the chart below. As shown, a positive linear relationship between the two variables is expected.
Question 3
Obs
y
x
y2
χ2

=0+1χ
ɛ = y –
1
3.32
0.72
11.02
0.52
2.39
1.34
1.98
2
1.40
1.68
1.96
2.82
2.35
2.12
– 0.72
3
0.65
– 0.72
0.42
0.52
– 0.47
0.19
0.46
4
0.93
0.81
0.86
0.66
0.75
1.42
– 0.49
5
– 1.21
– 0.35
1.46
0.12
0.42
0.49
– 1.70
6
– 1.62
– 2.30
2.62
5.29
3.73
– 1.08
– 0.54
7
1.41
0.80
1.99
0.64
1.13
1.41
0.00
8
0.18
0.40
0.03
0.16
0.07
1.09
– 0.91
9
1.88
– 0.65
3.53
0.42
– 1.22
0.24
1.64
10
1.35
0.39
1.82
0.15
0.53
1.08
0.27
Total
8.29
0.78
25.74
11.30
9.68
8.29

Completed table
obs
Y
X
SQY
SQX
YX
Y_HAT
E
1
3.32
0.72
11.02240
0.518400
2.390400
1.355465
1.964535
2
1.40
1.68
1.960000
2.822400
2.352000
2.091122
-0.691122
3
0.65
-0.72
0.422500
0.518400
-0.468000
0.251979
0.398021
4
0.93
0.81
0.864900
0.656100
0.753300
1.424433
-0.494433
5
-1.21
-0.35
1.464100
0.122500
0.423500
0.535513
-1.745513
6
-1.62
-2.30
2.624400
5.290000
3.726000
-0.958791
-0.661209
7
1.41
0.80
1.988100
0.640000
1.128000
1.416770
-0.006770
8
0.18
0.40
0.032400
0.160000
0.072000
1.110246
-0.930246
9
1.88
-0.65
3.534400
0.422500
-1.222000
0.305620
1.574380
10
1.35
0.39
1.822500
0.152100
0.526500
1.102583
0.247417
Eviews Summary Descriptive Results
Y
X
SQX
SQY
YX
Y_HAT
E
nbsp.Mean
nbsp.0.829000
nbsp.0.078000
nbsp.1.130240
nbsp.2.573570
nbsp.0.968170
nbsp.0.863494
-0.034494
nbsp.Std. Dev.
nbsp.1.447730
nbsp.1.117615
nbsp.1.659833
nbsp.3.141602
nbsp.1.482091
nbsp.0.856439
nbsp.1.136141
nbsp.Sum
nbsp.8.290000
nbsp.0.780000
nbsp.11.30240
nbsp.25.73570
nbsp.9.681700
nbsp.8.634939
-0.344939
nbsp.Sum Sq. Dev.
nbsp.18.86329
nbsp.11.24156
nbsp.24.79541
nbsp.88.82698
nbsp.19.76935
nbsp.6.601388
nbsp.11.61734
nbsp.Observations
nbsp.10
nbsp.10
nbsp.10
nbsp.10
nbsp.10
nbsp.10
nbsp.10
Question 4
The slope (β0) = (0.620455)(1.45)/(1.12) = 0.804
The intercept (β1) = 0.83 – (1.01)(0.08) = 0.766.
Question 5
SSR = Sum of (Predicted y – population mean of y)^2 = 6.6132
SSR
nbsp.Mean
nbsp.0.661329
nbsp.Median
nbsp.0.305059
nbsp.Maximum
nbsp.3.196195
nbsp.Minimum
nbsp.0.074847
nbsp.Std. Dev.
nbsp.0.994800
nbsp.Skewness
nbsp.1.938750
nbsp.Kurtosis
nbsp.5.352234
nbsp.Jarque-Bera
nbsp.8.570002
nbsp.Probability
nbsp.0.013774
nbsp.Sum
nbsp.6.613286
nbsp.Sum Sq. Dev.
nbsp.8.906647
nbsp.Observations
nbsp.10
Question 6
Variance of returns, σ2 = 2.10
Standard deviation of returns, y, σ = 1.45
Standard deviation, x = 1.12
Question 7
The slope is 0.804 and the p-value is 0.056. At 5% level of significance, the slope is not significantly different from zero. The intercept is 0.766 and the p-value is 0.079. At 5% level, the intercept is not significantly different from zero.
Variable
Coefficient
Std. Error
t-Statistic
Prob.nbsp.nbsp.
C
0.766310
0.381844
2.006865
0.0797
X
0.803721
0.359171
2.237714
0.0556
R-squared
0.384964
nbsp.nbsp.nbsp.nbsp.Mean dependent var
0.829000
Adjusted R-squared
0.308084
nbsp.nbsp.nbsp.nbsp.S.D. dependent var
1.447730
S.E. of regression
1.204243
nbsp.nbsp.nbsp.nbsp.Akaike info criterion
3.386435
Sum squared resid
11.60160
nbsp.nbsp.nbsp.nbsp.Schwarz criterion
3.446952
Log likelihood
-14.93218
nbsp.nbsp.nbsp.nbsp.Hannan-Quinn criter.
3.320048
F-statistic
5.007366
nbsp.nbsp.nbsp.nbsp.Durbin-Watson stat
1.877887
Prob(F-statistic)
0.055623
Question 8
Testing whether the slope, 0.804, is bigger or lower than 1 is a one-tailed t-test. Since the calculated t-statistic is below the rejection level, we cannot reject the null hypothesis that the slope is significantly lower than 1. The stock is not more volatile than the market.
Wald Test:
Equation: EQ_CAPM_REG
Test Statistic
Value
df
Probability
t-statistic
-0.612004
nbsp.8
nbsp.0.5575
F-statistic
nbsp.0.374549
(1, 8)
nbsp.0.5575
Chi-square
nbsp.0.374549
nbsp.1
nbsp.0.5405
Null Hypothesis: C(1) = 1
Null Hypothesis Summary:
Normalized Restriction (= 0)
Value
Std. Err.
-1 + C(1)
-0.233690
nbsp.0.381844
Restrictions are linear in coefficients.
Question 9
SSE = 11.60
SST = SSE + SSR = 11.60 + 7.26 = 18.86
Question 10
Correlation coefficient = 0.62 (Excel I21)
Coefficient of determination, r2 = 0.622 = 0.38
Question 11
Done and tables pasted in the questions above.