Author Question: Consider the following model y = 0 + 1x + , where y is the daily rate of return of a stock, and x is ... (Read 50 times)

Mimi · **on:** Feb 14, 2020

Consider the following model y = β₀ + β₁x + ∈, where y is the daily rate of return of a stock, and x is the daily rate of return of the stock market as a whole, measured by the daily rate of return of Standard & Poor's (S&P) 500 Composite Index. Using a random sample of n = 12 days from 1980, the least squares lines shown in the table below were obtained for four firms. The estimated standard error of

1 is shown to the right of each least squares prediction equation.

Firm

Estimated Market Model

Estimated Standard Error of β₁

Company A

y = .0010 + 1.40x

.03

Company B

y = .0005 - 1.21x

.06

Company C

y = .0010 + 1.62x

1

.34

Company D

y = .0013 + .76x

.15

For which of the three stocks, Companies B, C, or D, is there evidence (at α = .05) of a positive linear relationship between y and x?
◦ Company C only
◦ Companies B and D only
◦ Company D only
◦ Companies B and C only

tashiedavis420 · **Reply #1 on:** Feb 14, 2020

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