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Some investors feel that since AT& is such a large utility company, its earnings per share (EPS) should be related to the gross national product
Some investors feel that since AT& is such a large utility company, its earnings per share (EPS) should be related to the gross national product (GNP). From the data in the accompanying table perform the following: Estimate the least-square line; the standard error of each of the regression coefficients; the t-values; the coefficient of determination; the standard error of the regression; and the F value. Interpret all the information conveyed by the regression statistics above. Determine the point forecast of EPS when GNP= 800. What is the 95 percent confidence interval for your point forecast from part (c). In finance, we are often interested in how the return of one stock is related to some market index such as NYSE. The model we usually estimate to understand this relationship is know as the market model and is given by the equation R_it = a_j + b_j R_m,t + e_j,t Where R_lt = return on stock j in month t R_mt = return on some market index in month t a_j = intercept of the regression b_j = slope of the regression e_jt = a random error term Use the data in the table in next page, answer the following questions. The table gives monthly rates of return for the value weighted New York Stock Exchange Index and GE stock. Estimate the regression coefficients and interpret them. Use a t-test to test the significance of the slope of the regression. Find the GE stock's beta coefficient. What type of information the stock's beta provide to investors Find total risk, market risk, and diversifiable risk and interpret them. Forecast GE return, conditional on NYSE return of 0.05 and provide confidence interval for your forecast at 5 percent level
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