Suppose that today's date was December 31, 2015. Consider the following data on the only two firms in the stock market of Andorra: Share price on Shares outstanding (in millions) Dividend per share Stock 12/31/2015 during 2015 A 102 4 2 95 You calculate the dividend-to-price ratio of the stock market by dividing total dividends paid in a year by the total value of the stock market at the end of that year. You regress annual Andorran stock market returns on the previous year's Andorran dividend-to-price ratio. This results in an intercept estimate of 0.01 (t-stat = 2.41) and a slope estimate of 4.32 (t-stat = 3.59). The regression's R-squared is 0.22. What is the regression-implied expectation of the return on the Andorran stock market in 2016? O A. 16.08% O B. 12.57% O C. 14.16% O D. 8.03%
Suppose that today's date was December 31, 2015. Consider the following data on the only two firms in the stock market of Andorra: Share price on Shares outstanding (in millions) Dividend per share Stock 12/31/2015 during 2015 A 102 4 2 95 You calculate the dividend-to-price ratio of the stock market by dividing total dividends paid in a year by the total value of the stock market at the end of that year. You regress annual Andorran stock market returns on the previous year's Andorran dividend-to-price ratio. This results in an intercept estimate of 0.01 (t-stat = 2.41) and a slope estimate of 4.32 (t-stat = 3.59). The regression's R-squared is 0.22. What is the regression-implied expectation of the return on the Andorran stock market in 2016? O A. 16.08% O B. 12.57% O C. 14.16% O D. 8.03%
Chapter12: Sequences, Series And Binomial Theorem
Section12.3: Geometric Sequences And Series
Problem 12.58TI: What is the total effect on the economy of a government tax rebate of $500 to each household in...
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Transcribed Image Text:QUESTION 13
Suppose that today's date was December 31, 2015. Consider the following data on the only two firms in the stock market of
Andorra:
Shares outstanding
Share price on
Dividend per share
Stock
(in millions)
12/31/2015
during 2015
A
6
102
4
В
95
You calculate the dividend-to-price ratio of the stock market by dividing total dividends paid in a year by the total value of the
stock market at the end of that year.
You regress annual Andorran stock market returns on the previous year's Andorran dividend-to-price ratio. This results in an
intercept estimate of 0.01 (t-stat = 2.41) and a slope estimate of 4.32 (t-stat = 3.59). The regression's R-squared is 0.22.
What is the regression-implied expectation of the return on the Andorran stock market in 2016?
A. 16.08%
B. 12.57%
C. 14.16%
O D. 8.03%
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