a. Develop a scatter diagram with DJIA as the independent variable. b. Develop the estimated regression equation. c. Test for a significant relationship. Use a = .05.

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58. The Dow Jones Industrial Average (DJIA) and the Standard & Poor's 500 (S&P 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 S&P 500 is an index composed of 500
stocks. Some say the S&P 500 is a better measure of stock market performance because it
is broader based. The closing price for the DJIA and the S&P 500 for 15 weeks, beginning
with January 6, 2012, follow (Barron's website, April 17, 2012).
Date
DJIA
S&P
January 6
January 13
January 20
January 27
February 3
February 10
February 17
February 24
March 2
12,360
12,422
12,720
12,660
12,862
12,801
1278
1289
1315
1316
1345
DATA File
1343
12,950
12,983
1362
DJIAS&P500
1366
12,978
12,922
1370
March 9
March 16
1371
13,233
13,081
13,212
13,060
12,850
1404
March 23
March 30
April 5
April 13
1397
1408
1398
1370
a. Develop a scatter diagram with DJIA as the independent variable.
b. Develop the estimated regression equation.
c. Test for a significant relationship. Use a = .05.
d. Did the estimated regression equation provide a good fit? Explain.
e. Suppose that the closing price for the DJIA is 13,500. Predict the closing price for the
S&P 500.
f. Should we be concerned that the DJIA value of 13,500 usced to predict the S&P 500
value in part (e) is beyond the range of the data used to develop the estimated regres-
sion equation?
Transcribed Image Text:58. The Dow Jones Industrial Average (DJIA) and the Standard & Poor's 500 (S&P 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 S&P 500 is an index composed of 500 stocks. Some say the S&P 500 is a better measure of stock market performance because it is broader based. The closing price for the DJIA and the S&P 500 for 15 weeks, beginning with January 6, 2012, follow (Barron's website, April 17, 2012). Date DJIA S&P January 6 January 13 January 20 January 27 February 3 February 10 February 17 February 24 March 2 12,360 12,422 12,720 12,660 12,862 12,801 1278 1289 1315 1316 1345 DATA File 1343 12,950 12,983 1362 DJIAS&P500 1366 12,978 12,922 1370 March 9 March 16 1371 13,233 13,081 13,212 13,060 12,850 1404 March 23 March 30 April 5 April 13 1397 1408 1398 1370 a. Develop a scatter diagram with DJIA as the independent variable. b. Develop the estimated regression equation. c. Test for a significant relationship. Use a = .05. d. Did the estimated regression equation provide a good fit? Explain. e. Suppose that the closing price for the DJIA is 13,500. Predict the closing price for the S&P 500. f. Should we be concerned that the DJIA value of 13,500 usced to predict the S&P 500 value in part (e) is beyond the range of the data used to develop the estimated regres- sion equation?
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