Suppose that today's date was December 31, 2015. Consider the following data on the only two firms in the stock market of Andorra: Share price on Shares outstanding (in millions) Dividend per share Stock 12/31/2015 during 2015 A 102 4 2 95 You calculate the dividend-to-price ratio of the stock market by dividing total dividends paid in a year by the total value of the stock market at the end of that year. You regress annual Andorran stock market returns on the previous year's Andorran dividend-to-price ratio. This results in an intercept estimate of 0.01 (t-stat = 2.41) and a slope estimate of 4.32 (t-stat = 3.59). The regression's R-squared is 0.22. What is the regression-implied expectation of the return on the Andorran stock market in 2016? O A. 16.08% O B. 12.57% O C. 14.16% O D. 8.03%

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
icon
Related questions
Question
QUESTION 13
Suppose that today's date was December 31, 2015. Consider the following data on the only two firms in the stock market of
Andorra:
Shares outstanding
Share price on
Dividend per share
Stock
(in millions)
12/31/2015
during 2015
A
6
102
4
В
95
You calculate the dividend-to-price ratio of the stock market by dividing total dividends paid in a year by the total value of the
stock market at the end of that year.
You regress annual Andorran stock market returns on the previous year's Andorran dividend-to-price ratio. This results in an
intercept estimate of 0.01 (t-stat = 2.41) and a slope estimate of 4.32 (t-stat = 3.59). The regression's R-squared is 0.22.
What is the regression-implied expectation of the return on the Andorran stock market in 2016?
A. 16.08%
B. 12.57%
C. 14.16%
O D. 8.03%
Transcribed Image Text:QUESTION 13 Suppose that today's date was December 31, 2015. Consider the following data on the only two firms in the stock market of Andorra: Shares outstanding Share price on Dividend per share Stock (in millions) 12/31/2015 during 2015 A 6 102 4 В 95 You calculate the dividend-to-price ratio of the stock market by dividing total dividends paid in a year by the total value of the stock market at the end of that year. You regress annual Andorran stock market returns on the previous year's Andorran dividend-to-price ratio. This results in an intercept estimate of 0.01 (t-stat = 2.41) and a slope estimate of 4.32 (t-stat = 3.59). The regression's R-squared is 0.22. What is the regression-implied expectation of the return on the Andorran stock market in 2016? A. 16.08% B. 12.57% C. 14.16% O D. 8.03%
Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Similar questions
Recommended textbooks for you
MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman