Chapter 14, Problem 58SE

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	12,360	1278
January 13	12,422	1289
January 20	12,720	1315
January 27	12,660	1316
February 3	12,862	1345
February 10	12,801	1343
February 17	12,950	1362
February 24	12,983	1366
March 2	12,978	1370
March 9	12,922	1371
March 16	13,233	1404
March 23	13,081	1397
March 30	13,212	1408
April 5	13,060	1398
April 13	12,850	1370

1. a. Develop a scatter diagram with DJIA as the independent variable.
2. b. Develop the estimated regression equation.
3. c. Test for a significant relationship. Use α = .05.
4. d. Did the estimated regression equation provide a good fit? Explain.
5. e. Suppose that the closing price for the DJIA is 13,500. Predict the closing price for the S&P 500.
6. f. Should we be concerned that the DJIA value of 13,500 used to predict the S&P 500 value in part (e) is beyond the range of the data used to develop the estimated regression equation?