You are told that Land’s End, a catalog retailer, earned an excess return (Jensen’s alpha), in annualized terms, of 0.34 over the last 5 years and that it had a beta of 1.3 during the same period. Assuming that this estimate came from a quarterly regression of stock returns against a market return, and that the average annualized risk-free rate during the period was 0.048 Estimate the quarterly excess return. Estimate the intercept on the regression. Assuming that the standard error in the beta estimate is 0.35, provide the lower bound for the raw beta estimate, in a 67% confidence interval. Assuming that the standard error in the beta estimate is 0.35, provide the upper bound for the raw beta estimate, in a 67% confidence interval.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
You are told that Land’s End, a catalog retailer, earned an excess return (Jensen’s alpha), in annualized terms, of 0.34 over the last 5 years and that it had a beta of 1.3 during the same period. Assuming that this estimate came from a quarterly regression of stock returns against a market return, and that the average annualized risk-free rate during the period was 0.048
Estimate the quarterly excess return.
Estimate the intercept on the regression.
Assuming that the standard error in the beta estimate is 0.35, provide the lower bound for the raw beta estimate, in a 67% confidence interval.
Assuming that the standard error in the beta estimate is 0.35, provide the upper bound for the raw beta estimate, in a 67% confidence interval.
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