Aa Aa 7. Regression analysis A stock analyst has gathered annual data stock and

Question

Aa Aa 7. Regression analysis A stock analyst has gathered annual data stock and market return data for Laiho Industries and the S&P; 500 Year S&P; 500 market returns Laiho Industries stock returns 8% 12 13 25 25 29 4 13 -13 8 12 6 15 4 17 21 -15 25 10 12 The analyst ran a regression of Laiho Industries' stock returns (y) on S&P; 500 market returns (x). The results of the regression are shown below: - 0.0182 1,034 R-square0.48 0.69 variable, while Laiho Industries' stock In the regression, the S&P; 500 market returns are the returns are the variable

Explanation / Answer

S & P 500 - independent variable

Laiho Industrial stock return - dependent

y-intercept = a = 0.0182

slope = b = 1.034

aprroximately 48 % of variation is explained (given by R^2)

x = 0.17

y = 0.0182+1.034*x^

= 0.0182+1.034*0.17=0.19398

hence 19.398 %

for each 1 % increase in market return , the model predits increase of 1.034 % (fiven by b) in Laiho .

R-square is less than 0.50

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