Month Market Index % Return Company % Return August -3 4 September 8 7 October 0 1 November -2 1 December -5 0 January 0 0 February 7 7 March 0 -2 April 2 0 May -5 -1 a. Develop the least squares estimated regression equation. (Let x = Market Index % Return (as a %), and let y = Company % Return (as a %). Round your numerical values to four decimal places.)
Month Market Index % Return Company % Return August -3 4 September 8 7 October 0 1 November -2 1 December -5 0 January 0 0 February 7 7 March 0 -2 April 2 0 May -5 -1 a. Develop the least squares estimated regression equation. (Let x = Market Index % Return (as a %), and let y = Company % Return (as a %). Round your numerical values to four decimal places.)
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
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Problem 1P
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Question
A financial website reported the beta value for a certain company was 0.86. 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, such as the return of a market index. The slope of this regression equation is referred to as the stock's beta. Many financial analysts prefer to measure the risk of a stock by computing the stock's beta value.
Suppose the following data show the monthly percentage returns for the market index and the company for a recent year.
| Month | Market Index % Return |
Company % Return |
|---|---|---|
| August | -3 | 4 |
| September | 8 | 7 |
| October | 0 | 1 |
| November | -2 | 1 |
| December | -5 | 0 |
| January | 0 | 0 |
| February | 7 | 7 |
| March | 0 | -2 |
| April | 2 | 0 |
| May | -5 | -1 |
a. Develop the least squares estimated regression equation. (Let x = Market Index % Return (as a %), and let y = Company % Return (as a %). Round your numerical values to four decimal places.)
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Step 1
I am assuming that if the Market index % return is zero then the company's % return is also zero so there won't be any intercept term in the model.
Based on the above assumption I have solved the given problem.Please find the solution below
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