Homework Help is Here – Start Your Trial Now!
Math
Statistics
The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate of return on a financial instrument, such as a common stock, in such a way that it is linearly related to the rate of return on the overal market. Specifically RB Rais+ You are to study the relationship between the two variables and estimate the above model: R-rate of return on Stock A for month i, i=1,2,---,59. Rets-market rate of return for month i, i 1,2,,59. represent's the stocks 'beta' value, or its systematic risk. It measure's the stocks volatility related to the market volatility. A represents the risk-free interest rate. The data in the .csv file contains the data on the rate of return of a large energy company which will be referred to as Acme Oil and Gas and the corresponding rate of return on the Toronto Composite Index (TSE) for 59 randomly selected months. Therefore Re represents the monthly rate of return for a common share of Acme Oil and Gas stock; RTSE, represents the monthly rate of return (increase or decrease) of the TSE Index for the same month, month i. The first column in this data file contains the mo of return on Acme Oil and gas stock; the second column contains the monthly rate of return on the TSE index for the same month. a) Use software to estimate this model. Use four-decimals in each of your least-squares estimates your answer. RTSE b) Find the coefficient of determination. Expresses as a percentage, and use two decimal places in your answer. N c) in the context of the data, interpret the meaning of the coefficient determination.

The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate of return on a financial instrument, such as a common stock, in such a way that it is linearly related to the rate of return on the overal market. Specifically RB Rais+ You are to study the relationship between the two variables and estimate the above model: R-rate of return on Stock A for month i, i=1,2,---,59. Rets-market rate of return for month i, i 1,2,,59. represent's the stocks 'beta' value, or its systematic risk. It measure's the stocks volatility related to the market volatility. A represents the risk-free interest rate. The data in the .csv file contains the data on the rate of return of a large energy company which will be referred to as Acme Oil and Gas and the corresponding rate of return on the Toronto Composite Index (TSE) for 59 randomly selected months. Therefore Re represents the monthly rate of return for a common share of Acme Oil and Gas stock; RTSE, represents the monthly rate of return (increase or decrease) of the TSE Index for the same month, month i. The first column in this data file contains the mo of return on Acme Oil and gas stock; the second column contains the monthly rate of return on the TSE index for the same month. a) Use software to estimate this model. Use four-decimals in each of your least-squares estimates your answer. RTSE b) Find the coefficient of determination. Expresses as a percentage, and use two decimal places in your answer. N c) in the context of the data, interpret the meaning of the coefficient determination.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
See similar textbooks
icon
Related questions
Question
The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate of return on a financial instrument, such as a common stock, in such a way that it is linearly related to the rate of return on the overal market. Specifically, RStockAiBo + BR Markets + e You are to study the relationship between the two variables and estimate the above model: R StockAi-rate of return on Stock A for month i, i = 1,2,---, 59. RMarket-market rate of return for month i, i=1,2,..., 59. B₁ represent's the stocks 'beta' value, or its systematic risk. It measure's the stocks volatility related to the market volatility. Bo represents the risk-free interest rate. The data in the .csv file contains the data on the rate of return of a large energy company which will be referred to as Acme Oil and Gas and the corresponding rate of return on the Toronto Composite Index (TSE) for 59 randomly selected months. Therefore Re, represents the monthly rate of return for a common share of Acme Oil and Gas stock; RTSE, represents the monthly rate of return (increase or decrease) of the TSE Index for the same month, month i. The first column in this data file contains the mont of return on Acme Oil and gas stock; the second column contains the monthly rate of return on the TSE index for the same month. (a) Use software to estimate this model. Use four-decimals in each of your least-squares estimates your answer. RAmes=+RTSE; (b) Find the coefficient of determination. Expresses as a percentage, and use two decimal places in your answer. (c) in the context of the data, interpret the meaning of the coefficient of determination. OA. There is a strong, positive linear relationship between the monthly rate of return of Acme stock and the monthly rate of return of the TSE Index. OB. The percentage found above is the percentage of variation in the monthly rate of return of the TSE Index that can be explained by its linear dependency with the monthly rate of return of Acme stock. OC. There is a weak, positive linear relationship between the monthly rate of return of Acme stock and the monthly rate of return of the TSE Index. O D. The percentage found above is the percentage of variation in the monthly rate of return of Acme stock that can be explained by its linear dependency with the monthly rate of return of the TSE Index. (d) Find the standard deviation of the prediction/regression, using two decimals in your answer.
Transcribed Image Text:The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate of return on a financial instrument, such as a common stock, in such a way that it is linearly related to the rate of return on the overal market. Specifically, RStockAiBo + BR Markets + e You are to study the relationship between the two variables and estimate the above model: R StockAi-rate of return on Stock A for month i, i = 1,2,---, 59. RMarket-market rate of return for month i, i=1,2,..., 59. B₁ represent's the stocks 'beta' value, or its systematic risk. It measure's the stocks volatility related to the market volatility. Bo represents the risk-free interest rate. The data in the .csv file contains the data on the rate of return of a large energy company which will be referred to as Acme Oil and Gas and the corresponding rate of return on the Toronto Composite Index (TSE) for 59 randomly selected months. Therefore Re, represents the monthly rate of return for a common share of Acme Oil and Gas stock; RTSE, represents the monthly rate of return (increase or decrease) of the TSE Index for the same month, month i. The first column in this data file contains the mont of return on Acme Oil and gas stock; the second column contains the monthly rate of return on the TSE index for the same month. (a) Use software to estimate this model. Use four-decimals in each of your least-squares estimates your answer. RAmes=+RTSE; (b) Find the coefficient of determination. Expresses as a percentage, and use two decimal places in your answer. (c) in the context of the data, interpret the meaning of the coefficient of determination. OA. There is a strong, positive linear relationship between the monthly rate of return of Acme stock and the monthly rate of return of the TSE Index. OB. The percentage found above is the percentage of variation in the monthly rate of return of the TSE Index that can be explained by its linear dependency with the monthly rate of return of Acme stock. OC. There is a weak, positive linear relationship between the monthly rate of return of Acme stock and the monthly rate of return of the TSE Index. O D. The percentage found above is the percentage of variation in the monthly rate of return of Acme stock that can be explained by its linear dependency with the monthly rate of return of the TSE Index. (d) Find the standard deviation of the prediction/regression, using two decimals in your answer.
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
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
SEE MORE TEXTBOOKS