Calculate monthly returns for SP500, JPMorgan Chase & Co., Bank of America Corpo
ID: 3314819 • Letter: C
Question
Calculate monthly returns for SP500, JPMorgan Chase & Co., Bank of America Corporation, Wells Fargo & Company, and Citigroup Inc.
Estimate a regression line using returns of JPMorgan Chase & Co. as dependent variable and returns of SP500, Bank of America Corporation, Wells Fargo & Company, and Citigroup Inc.as independent variables.
Interpret the estimated coefficients of your regression line and discuss their finance implications, in writing, in 6 lines in a Word file.
Date JPM BAC WFC C SP500 1/2/2014 51.32 16.24 41.96 46.98 2063.36 2/3/2014 52.67 16.02 43.25 48.17 2080.41 3/3/2014 56.28 16.68 46.34 47.15 2079.36 4/1/2014 52.22 14.68 46.25 47.46 1920.03 5/1/2014 51.84 14.68 47.65 47.13 1972.18 6/2/2014 53.75 14.92 49.32 46.67 2103.84 7/1/2014 54.18 14.8 47.76 48.47 2063.11 8/1/2014 55.85 15.61 48.61 51.19 2107.39 9/2/2014 56.59 16.6 49.02 51.35 2085.51 10/1/2014 57.2 16.7 50.17 53.06 2067.89 11/3/2014 56.89 16.59 51.82 53.5 2104.5 12/1/2014 59.18 17.47 52.15 53.63 1994.99 1/2/2015 51.76 14.79 49.39 46.55 2058.9 2/2/2015 58.33 15.44 52.46 51.97 2067.56 3/2/2015 57.66 15.07 52.09 51.08 2018.05 4/1/2015 60.61 15.6 52.76 52.86 1972.29 5/1/2015 63.03 16.16 53.94 53.67 2003.37 6/1/2015 64.92 16.72 54.21 54.82 1930.67 7/1/2015 66.09 17.56 55.79 58.06 1960.23 8/3/2015 61.82 16.05 51.74 53.12 1923.57 9/1/2015 58.8 15.35 49.82 49.27 1883.95 10/1/2015 62.41 16.54 52.53 52.86 1872.34 11/2/2015 64.77 17.18 53.83 53.77 1859.45 12/1/2015 64.68 16.85 53.62 51.99 1782.59Explanation / Answer
We use Minitab to solve this question.
Regression Analysis: JPM versus BAC, WFC, C, SP500
Analysis of Variance
Source DF Adj SS Adj MS F-Value P-Value
Regression 4 460.150 115.037 55.42 0.000
BAC 1 12.108 12.108 5.83 0.026
WFC 1 20.103 20.103 9.68 0.006
C 1 4.463 4.463 2.15 0.159
SP500 1 31.665 31.665 15.25 0.001
Error 19 39.439 2.076
Total 23 499.589
Model Summary
S R-sq R-sq(adj) R-sq(pred)
1.44075 92.11% 90.44% 86.60%
Coefficients
Term Coef SE Coef T-Value P-Value VIF
Constant 20.4 11.8 1.72 0.102
BAC 1.264 0.523 2.42 0.026 2.47
WFC 0.573 0.184 3.11 0.006 4.57
C 0.361 0.246 1.47 0.159 6.54
SP500 -0.01488 0.00381 -3.91 0.001 1.34
Regression Equation
JPM = 20.4 + 1.264 * BAC + 0.573 * WFC + 0.361 * C - 0.01488 * SP500
Interpritation of estimated coefficients-
The intercept 20.4 represent the y intercept that is the value of y takes when all independent variables are zero.
The slope -0.0148 it denotes the number of units JPM changes(increases) when BAC changes (increases) one unit keeping all another independent variables zero.
The slope 0.537 it denotes the number of units JPM changes(increases) when WFC changes(increases) one unit keeping all another independent variables zero.
The slope 0.361 it denotes the number of units JPM changes (increases)when C changes (increases) one unit keeping all another independent variables zero.
The slope -0.0148 it denotes the number of units JPM changes(decreases) when SP500 changes(decreases) one unit keeping all another independent variables zero.
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