The Capital Asset Pricing Model $($CAPM$)$ says that the the required return on an investment I should equal the risk$-$free rate of return on a safe investment $($government $t$ bills$)$ plus a premium to compensate for the riskiness of the stock. The premium is beta $x($market return on stock I $-$ risk$-$free rate$).$ The higher the value of beta, the higher the required rate of return on this investment.

Using the Stock Price $60$ months file on OWL, we calculate a beta for a stock by regressing the monthly returns of that stock on the monthly market returns for the SP$500.$

Returns on stock $1=a+b1($SP$500$ returns$)$

The stock's beta $=b1.$

Investment companies report the betas on stocks.

beta $>1\mathrm{.}0$ means the stock is more volatile than the average market return on the S&P $500.$

beta $<mn\; id="EditorElement\_15185376">1</mn><mn\; id="EditorElement\_15185377">.</mn><mn\; id="EditorElement\_15185378">0</mn>$ means the stock returns are less volatile than average market returns for the S&P $500$

beta $=1$ means the stock moves with the average market returns.

Beta is essentially the regression coefficient of a stock's historical returns compared to those of the S&P $500$ index. This coefficient represents the slope of a line of best fit correlating the stock's returns against the index's. $($Investopedia$)$

QUESTION:

For this lab, use the Return on Stock Price $60$ month.xls data on the fileserver in SPSS Data$>$Econometrics $>$ Newbold$8$e$.$ Do an hypothesis test to see if the beta on the stock TataMotorsLimitedADR is significantly more volatile than the average market return. In other words, calculate a regression and test

Ho: beta $=1\mathrm{.}0$

$H1$ : beta $>1\mathrm{.}0$

at a level of significance of $5\%.$

$*$Round answers to $2$ DECIMALS.

$**$Use BEST table, include negative signs if negative.

The estimated beta is

The test statistic of the hypothesis test is $q,$

The critical value is $.q,$

Conclusion: We accept $H1$ and conclude the stock's returns are more volatile than the average market return. Answer $1$ if True or $0$ if False.

Blank # $1q,$ A$.$

Blank # $2$ A

Blank # $3$