LEKS financial analyst is examining the relationship between stock prices and ea

Question

LEKS financial analyst is examining the relationship between stock prices and earnings per share. She chooses fifteen, publicly traded ompanies at random and records for each the compny's current stock price and the company's eamings per share reported for the past 12 months. Her data are given below, with x denoting the earnings per share from the previous yoar and y denoting the urrent stock price (both in dollars). A scatter plot of her data is shown in Figure 1 (in dollars) 3845 42.00 37.70 59.24 32 81 43.03 26.50 1783 29.50 19.98 57.79 40.36 49.55 15.14 (in dollars) 1.07 1.88 160 2. 14 0.84 1.64 1.40 0.98 0.77 1.33 0.67 2.89 0.90 1.66 0.61 10 50 Figure 1 The value of the sample correlation coefficient r for these data is approximately 0.849 Answer the following mputations to at least four decimal places, and round your answers as specified below. (If necessaty consult a list of formulas.) Search the web and Windows

Explanation / Answer

calculation procedure for correlation

sum of (x) = x = 539.35

sum of (y) = y = 20.38

sum of (x^2)= x^2 = 21912.2731

sum of (y^2)= y^2 = 33.235

sum of (x*y)= x*y = 833.1465

to caluclate value of r( x,y) = covariance ( x,y ) / sd (x) * sd (y)

covariance ( x,y ) = [ x*y - N *(x/N) * (y/N) ]/n-1

= 833.1465 - [ 15 * (539.35/15) * (20.38/15) ]/15- 1

= 6.69

and now to calculate r( x,y) = 6.69/ (SQRT(1/15*833.1465-(1/15*539.35)^2) ) * ( SQRT(1/15*833.1465-(1/15*20.38)^2)

=6.69 / (12.959*0.608)

=0.849

value of correlation is =0.849

coeffcient of determination = r^2 = 0.7209

properties of correlation

1. If r = 1 Corrlation is called Perfect Positive Corrlelation

2. If r = -1 Correlation is called Perfect Negative Correlation

3. If r = 0 Correlation is called Zero Correlation

& with above we conclude that correlation ( r ) is = 0.8491> 0 ,perfect positive correlation

Answer:

correlation ( r ) is = 0.8491

( X) ( Y) X^2 Y^2 X*Y 38.45 1.07 1478.4025 1.1449 41.1415 42 1.88 1764 3.5344 78.96 37.7 1.6 1421.29 2.56 60.32 59.24 2.14 3509.3776 4.5796 126.7736 29.47 0.84 868.4809 0.7056 24.7548 32.81 1.64 1076.4961 2.6896 53.8084 43.03 1.4 1851.5809 1.96 60.242 26.5 0.98 702.25 0.9604 25.97 17.83 0.77 317.9089 0.5929 13.7291 29.5 1.33 870.25 1.7689 39.235 19.98 0.67 399.2004 0.4489 13.3866 57.79 2.89 3339.6841 8.3521 167.0131 40.36 0.9 1628.9296 0.81 36.324 50 1.66 2455.2025 2.7556 82.253 15 0.61 229.2196 0.3721 9.2354

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.