A security analyst has regressed the monthly returns on Exxon Mobil equity shares over the past five years against those on the Standard & Poor's 500 stock Index over the same period. The resulting regression equation IS EM = 0.09-1.57/sp. Use this equation to estimate Exxon Mobil's equity beta. Note: Round your answer to 2 decimal places. Estimated Exxon Mobil's equity beta
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B.22.
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- An analyst gathered daily stock returns for Feburary 1 through March 31, calculated the Fama-French factors for each day in the sample (SMBt and HMLt), and estimated the Fama-French regression model shown in Equation 6-21. The estimated coefficients were ai = 0, bi = 1.2, ci = 0.4, and di = 1.3. On April 1, the market return was 10%, the return on the SMB portfolio (rSMB) was 3.2%, and the return on the HML portfolio (rHML) was 4.8%. Using the estimated model, what was the stocks predicted return for April 1?The following table reports the percentage of stocks in a portfolio for nine quarters: a. Construct a time series plot. What type of pattern exists in the data? b. Use trial and error to find a value of the exponential smoothing coefficient that results in a relatively small MSE. c. Using the exponential smoothing model you developed in part (b), what is the forecast of the percentage of stocks in a typical portfolio for the second quarter of year 3?The Dow Jones Industrial Average (DJIA) and the Standard Poors 500 (SP 500) indexes are used as measures of overall movement in the stock market The DJIA is based on the price movements of 30 large companies: the SP 500 is an index composed of 500 stocks. Some say the SP 500 is a better measure of stock market performance because it is broader based. The closing price for the DJIA and the SP 500 for 15 weeks, beginning with January 6, 2012, follow (Barrons web site, April 17, 2012). a. Develop a scatter chart for these data with DJIA as the independent variable. What does the scatter chart indicate about the relationship between DJIA and SP 500? b. Develop an estimated regression equation showing how SP 500 is related to DJIA. What is the estimated regression model? c. What is the 95% confidence interval for the regression parameter 1? Based on this interval, what conclusion can you make about the hypotheses that the regression parameter 1 is equal to zero? d. What is the 95% confidence interval for the regression parameter 0? Based on this interval, what conclusion can you make about the hypotheses that the regression parameter 0 is equal to zero? e. How much of the variation in the sample values of SP 500 does the model estimated in part (b) explain? f. Suppose that the closing price for the DJIA is 13,500. Estimate the closing price for the SP 500. g. Should we be concerned that the DJIA value of 13,500 used to predict the SP 500 value in part (f) is beyond the range of the DJIA used to develop the estimated regression equation?
- A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate, g, throughout time. The stock’s required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL?A sample containing years to maturity and (percent) yield for 40 corporate bonds is contained in the file named CorporateBonds (Barron’s, April 2. 2012). Develop a scatter chart of the data using years to maturity as the independent variable. Does a simple linear regression model appear to be appropriate? Develop an estimated quadratic regression equation with years to maturity and squared values of years to maturity as the independent variables. How much variation in the sample values of yield is explained by this regression model? Test the relationship between each of the independent variables and the dependent variable at a 0.05 level of significance. How would you interpret this model? Create a plot of the linear and quadratic regression lines overlaid on the scatter chart of years to maturity and yield. Does this helps you better understand the difference in how the quadratic regression model and a simple linear regression model fit the sample data? Which model does this chart suggest provides a superior fit to the sample data? What other independent variables could you include in your regression model to explain more variation in yield?Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Assume that an individual investor wants to select one market segment for a new investment. A forecast shows improving to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3). What is the preferred market segment for the investor, and what is the expected return percentage? At a later date, a revised forecast shows a potential for an improvement in economic conditions. New probabilities are as follows: improving (0.4), stable (0.4), and declining (0.2). What is the preferred market segment for the investor based on these new probabilities? What is the expected return percentage?
- A security analyst has regressed the monthly returns on Exxon Mobil equity shares over the past five years against those on the Standard & Poor's 500 stock index over the same period. The resulting regression equation is rEM = 0.08 + 1.44 rSP. Use this equation to estimate Exxon Mobil's equity beta.You find a certain stock that had returns of 16 percent, −23 percent, 24 percent, and 9 percent for four of the last five years. The average return of the stock over this period was 10.2 percent. a. What was the stock’s return for the missing year? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) b. What is the standard deviation of the stock’s returns? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period: Year Large-Company stocks US Treasury bills 1 3.95% 6.53% 2 14.13 4.38 3 19.07 4.25 4 −14.61 7.30 5 −32.10 4.94 6 37.32 6.14 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the average risk premium over this period? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent…