Answered: Month Market Index % Return Company %…

Functions and Change: A Modeling Approach to College Algebra (MindTap Course List)

6th Edition

ISBN:9781337111348

Author:Bruce Crauder, Benny Evans, Alan Noell

Publisher:Bruce Crauder, Benny Evans, Alan Noell

Chapter3: Straight Lines And Linear Functions

Section3.CR: Chapter Review Exercises

Problem 15CR: Life Expectancy The following table shows the average life expectancy, in years, of a child born in...

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A financial website reported the beta value for a certain company was 0.86. Betas for individual stocks are determined by simple linear regression. The dependent variable is the total return for the stock, and the independent variable is the total return for the stock market, such as the return of a market index. The slope of this regression equation is referred to as the stock's beta. Many financial analysts prefer to measure the risk of a stock by computing the stock's beta value.

Suppose the following data show the monthly percentage returns for the market index and the company for a recent year.

Month	Market Index % Return	Company % Return
August	-3	4
September	8	7
October	0	1
November	-2	1
December	-5	0
January	0	0
February	7	7
March	0	-2
April	2	0
May	-5	-1

a. Develop the least squares estimated regression equation. (Let x = Market Index % Return (as a %), and let y = Company % Return (as a %). Round your numerical values to four decimal places.)

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