Part B

Financial Analysts will often try to model returns on a singular company against a market index - this is sometimes referred to as themarket model.Your task is to replicate this model by regressing the returns of DigitalX (Y variable) against the returns on the ASX200 index (X variable) as provided in the data file.

1. Critically assess the veracity of this model by examining the goodness of fit, coefficients (together with the 95% confidence interval) and residuals.[Topics 7 & 9]
2. Identify two factors that you believe could improve the regression model.Remember to explain why you think these factors are important, where you might source them from and whether their influence is likely to be positive or negative.

(3 + 3 = 6 marks)