Market Model How to gather the data to produce a market model: Collect monthly data on the price of a particular stock at the beginning and the end of the month for the years 2019 and 2020 Calculate the return on the stock using the following formula: return= ((p_(t+1)-p_t))/p_t Now collect monthly data (again at the beginning and end of the month) on any index with which you would like to compare your stock (again for 2019 and 2020). Calculate the market return using the formula above Now the data is ready for a simple regression analysis.

Using the steps from class, complete a simple regression analysis. Once you have completed the analysis, answer the questions below.

1.Which variable should be the response variable?

2,Which variable should be the predictor variable? Check with a colleague to ensure you are in agreement. In this model, there is a correct way to choose the response and predictor variables.

3. Create a scatter plot and describe it: Report and interpret the correlation:

4. What type of data set is this?

5.Interpret the y-intercept for this model:

6. Interpret the slope for this model:

7.Evaluate and interpret the residual plot How well does the model work in explaining the individual stock return?

Examine the regression analysis for the beta. This is the b, the slope, and is the systemic risk of the company called the beta. Interpretation of the , the beta, comes from financial literature and applies to stock returns only. If >1, the company stock is more risky than the market as a whole. If <1, the company stock is less risky than the market as a whole.

8. Find the in your model and interpret it.

9.Would you recommend using this model for forecasting the change in your chosen stock price for the next month? Explain why or why not.