Question
You decide to investigate the volatility of John Deere stock price using the Market Model. The market model is Y r = 0 + rXr
You decide to investigate the volatility of John Deere stock price using the "Market Model." The market model is Y r = 0 + rXr + where Y r is the return on the asset (John Deere stock, in this case) and Xr is the return on the market or a suitable proxy such as the S&P 500. In the Practice Final Exam Workbook, you will find 61 monthly returns for the S&P 500 as well as John Deere stock. a. What is your estimated regression equation? Comment on the fit of the model. b. What is the estimated slope parameter (estimate of r ) for John Deere? How would you interpret it? c. Report the hypothesis test for significance of the overall model. Specifically, state your hypothesis, test statistic, and conclusions at = .05 .
| Month | JD Stock Price | JD Monthly Stock Return | S&P 500 Monthly Return |
| 1 | 46.875 | 0.047486 | 0.024828 |
| 2 | 54.625 | 0.165333 | 0.041518 |
| 3 | 51.625 | -0.05492 | 0.067281 |
| 4 | 48.75 | -0.05569 | 0.022203 |
| 5 | 49.25 | 0.010256 | 0.000346 |
| 6 | 55.875 | 0.134518 | 0.038577 |
| 7 | 52 | -0.06935 | -0.04789 |
| 8 | 51.625 | -0.00721 | 0.044859 |
| 9 | 51.875 | 0.004843 | 0.019649 |
| 10 | 53.375 | 0.028916 | -0.01914 |
| 11 | 56.625 | 0.06089 | 0.01186 |
| 12 | 48.375 | -0.1457 | -0.04393 |
| 13 | 48 | -0.00775 | 0.111588 |
| 14 | 50.125 | 0.044271 | -0.0199 |
| 15 | 51 | 0.017456 | 0.009565 |
| 16 | 51.125 | 0.002451 | -0.02183 |
| 17 | 49.625 | -0.02934 | 0.027893 |
| 18 | 45.875 | -0.07557 | 0.000964 |
| 19 | 42.625 | -0.07085 | -0.01736 |
| 20 | 42 | -0.01466 | 0.039374 |
| 21 | 38.875 | -0.07441 | -0.024 |
| 22 | 43.625 | 0.122186 | 0.009106 |
| 23 | 39.5 | -0.09456 | 0.002106 |
| 24 | 39.125 | -0.00949 | 0.030262 |
| 25 | 43.75 | 0.118211 | 0.010108 |
| 26 | 46.375 | 0.06 | 0.007046 |
| 27 | 52 | 0.121294 | 0.010484 |
| 28 | 53.125 | 0.021635 | 0.018697 |
| 29 | 60.25 | 0.134118 | -0.02542 |
| 30 | 63.125 | 0.047718 | 0.022717 |
| 31 | 66.375 | 0.051485 | 0.000755 |
| 32 | 63.625 | -0.04143 | -0.00533 |
| 33 | 72.875 | 0.145383 | 0.034432 |
| 34 | 72.375 | -0.00686 | -0.00999 |
| 35 | 77.25 | 0.067358 | 0.019393 |
| 36 | 70.875 | -0.08252 | -0.01291 |
| 37 | 74 | 0.044092 | 0.010091 |
| 38 | 80.5 | 0.087838 | 0.032501 |
| 39 | 84.375 | 0.048137 | -0.03005 |
| 40 | 84.375 | 0 | -0.04575 |
| 41 | 76.625 | -0.09185 | 0.011531 |
| 42 | 69.75 | -0.08972 | 0.012419 |
| 43 | 67.625 | -0.03047 | -0.02681 |
| 44 | 70.125 | 0.036969 | 0.031467 |
| 45 | 74.25 | 0.058824 | 0.037643 |
| 46 | 68.625 | -0.07576 | -0.0269 |
| 47 | 71.625 | 0.043716 | 0.020834 |
| 48 | 64.25 | -0.10297 | -0.03951 |
| 49 | 66.25 | 0.031128 | 0.012299 |
| 50 | 71.25 | 0.075472 | 0.024278 |
| 51 | 76.5 | 0.073684 | 0.036074 |
| 52 | 81.25 | 0.062091 | 0.027329 |
| 53 | 82 | 0.009231 | 0.02796 |
| 54 | 86.5 | 0.054878 | 0.036312 |
| 55 | 85.625 | -0.01012 | 0.021279 |
| 56 | 89.875 | 0.049635 | 0.031776 |
| 57 | 85.625 | -0.04729 | -0.00032 |
| 58 | 81.375 | -0.04964 | 0.040097 |
| 59 | 89.375 | 0.09831 | -0.00498 |
| 60 | 33 | 0.107692 | 0.041049 |
| 61 | 35.25 | 0.068182 | 0.017444 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Calculus I With Integrated Precalculus
Authors: Laura Taalman
1st Edition
1464153027, 9781464153020
