2) The "beta coefficient" is a measure of the riskiness of a stock. It is the slope of the regression line between the stock's return (i.e., percentage gain or loss) as the "Y" variable, and the overall market return, the "X" variable. For Sirius Cybernetics Corporation relevant data for four time periods (usually, months) are as follows:

Return on Sirius Cybernetics

-5%

4.2%

11.4%

16.6%

Return on overall market

-5%

+1%

+7%

+13%

Once again, we've used this example data set in our previous lecture review problems (firsthere, thenhere). As before, you may wish to consult those review assignments, or your solutions to them, in completing today's activities.

a) What is the "beta coefficient" for Sirius Cybernetics? Give a 95% confidence interval for this quantity.

b) Stocks with beta coefficients of 1 have just as much risk as the overall stock market. Perform an appropriate hypothesis test of H₀: ₁= 1 vs. H_A: ₁ 1.