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A research analyst is trying to determine whether a firm's price-earnings (PE) and price-sales (PS) ratios can explain the firm's stock performance over the past

A research analyst is trying to determine whether a firm's price-earnings (PE) and price-sales (PS) ratios can explain the firm's stock performance over the past year. A PE ratio is calculated as a firm's share price compared to the income or profit earned by the firm per share. Generally, a high PE ratio suggests that investors are expecting higher earnings growth in the future compared to companies with a lower PE ratio. The PS ratio is calculated by dividing a firm's share price by the firm's revenue per share for the trailing 12 months. In short, investors can use the PS ratio to determine how much they are paying for a dollar of the firm's sales rather than a dollar of its earnings (PE ratio). In general, the lower the PS ratio, the more attractive the investment. The accompanying table shows a portion of the year-to-date returns (Return in %) and the PE and PS ratios for 30 firms.

Firm

Return

PE

PS

1

4.6

14.36

2.41

2

-4.3

11.01

0.78

3

5.9

11.97

2.24

4

4.9

11.29

1.37

5

-11.2

9.84

1.82

6

20.6

15.65

0.84

7

64.2

16.05

1.59

8

18.7

8.98

1.03

9

-15.4

11.35

2.75

10

48.2

13.77

1.46

11

7.5

11.49

1.21

12

20.9

14.35

1.33

13

-18.3

8.2

0.84

14

2.9

9.49

2.65

15

12.2

11.21

1.96

16

-3.8

12.68

2.77

17

2.1

9.71

1.99

18

16.2

13.46

1.13

19

23.1

14.95

3.37

20

-1.2

8.97

2.4

21

-8.3

10.53

3.68

22

-3.6

7.89

2.22

23

15.8

16.38

4.58

24

21.3

16.27

0.86

25

6

15.09

2.32

26

11.6

9.17

0.99

27

13.8

14.94

1.39

28

15.8

15.58

0.9

29

0.9

12.58

0.46

30

16.3

13.94

1.98

Estimate: Return = 0 + 1PE + 2PS + . (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)

What is the predicted return for a firm with a PE ratio of 10 and a PS ratio of 2? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round final answer to 2 decimal places.)

What is the standard error of the estimate? (Round your answer to 2 decimal places.)

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