Question
USE SPSS The file Stock.sav contains data of mean and standard deviation of excess return of the S&P 50 stocks. In finance the relationship between
USE SPSS
The file Stock.sav contains data of mean and standard deviation of excess return of the S&P 50 stocks. In finance the relationship between excess return (defined as the return minus the return of a risk free alternative) is important. The assumption is that a higher risk measured as a higher standard deviation should lead to a higher excess return to compensate for the risk. One way to model this relationship is via the following simple linear regression model: = 0 + 1 + where Yi is the mean excess return for company i and Xi is the standard deviation of the excess return a. Test the hypothesis H: 1= 0 versus H: 10. (you may decide =0.1, 0.05 or =0.01 yourself). Comment the conclusion of the test. Is it in line of what you expected? Also comment on the sign of 1. Is the sign what you expected? b. Interpret and comment on the R-square of the model.
mean:1.34 1.08 .22 .98 1.32 1.03 1.22 1.13 .94 .80 1.60 1.12 1.48 1.60 .84 2.13 .01 1.07 1.65 2.14 1.06 .92 .11 1.08 3.00 .74 .46 .67 1.40 1.15 .50 1.60 1.72 1.14 2.55 1.53 .22 1.55 1.39 .76 1.15 1.20 .78 1.56 .71 1.09 1.60 1.56 1.44 1.09
stdv:9.94 5.75 4.51 7.78 9.64 6.98 6.73 7.27 8.27 7.51 10.35 7.60 11.54 9.24 10.31 14.36 5.78 8.59 8.01 13.87 6.21 6.85 2.87 6.10 16.63 8.72 9.66 7.50 9.52 5.38 12.32 8.50 12.90 8.46 14.85 8.74 5.02 7.29 9.38 7.37 6.99 7.62 7.83 9.07 8.85 9.70 12.89 8.65 10.94 5.85
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