In order to estimate the market risk for Google, I have estimated the following market model,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In order to estimate the market risk for Google, I have estimated the following market model, n=a+ßr₂+ & where , is Google's monthly return and is the monthly market return. Let X - [17]. and Y=[r] be matrix and vector of monthly returns, with the following information: first row of X'X matrix is [60 3], first row of X'Y matrix is [6], and Y'Y is 2.5. In the following table, I report the OLS estimates for the whole sample. (TSS: total sum of square: RSS: residual sum of square) Model: Variable a B R² TSS RSS # of obs. n Unconstrained Model Std (5₂) 0.02 7 Coefficient 0.042 1.2 ? ? 1.14 ? t-ratio ? 6.0 Constrained Model (a = 0) Coefficient Std. Error 1.33 1.2 0.08 [4 points] How many observations are? What is the average monthly market return? (2) [3 points] Test the hypothesis Ho: a = 0. What is the standard error for the estimator? (3) [5 points] Find TSS and R². [hint: TSS-Y'Y-n (mean of Y)'] (4) [4 points] Impose the constraint of a = 0 and re-estimate the pusing OLS. Using the F test to see if a = 0? In order to estimate the market risk for Google, I have estimated the following market model, n=a+ßr₂+ & where , is Google's monthly return and is the monthly market return. Let X - [17]. and Y=[r] be matrix and vector of monthly returns, with the following information: first row of X'X matrix is [60 3], first row of X'Y matrix is [6], and Y'Y is 2.5. In the following table, I report the OLS estimates for the whole sample. (TSS: total sum of square: RSS: residual sum of square) Model: Variable a B R² TSS RSS # of obs. n Unconstrained Model Std (5₂) 0.02 7 Coefficient 0.042 1.2 ? ? 1.14 ? t-ratio ? 6.0 Constrained Model (a = 0) Coefficient Std. Error 1.33 1.2 0.08 [4 points] How many observations are? What is the average monthly market return? (2) [3 points] Test the hypothesis Ho: a = 0. What is the standard error for the estimator? (3) [5 points] Find TSS and R². [hint: TSS-Y'Y-n (mean of Y)'] (4) [4 points] Impose the constraint of a = 0 and re-estimate the pusing OLS. Using the F test to see if a = 0?
Expert Answer:
Answer rating: 100% (QA)
Number of observations n This can be found from the bottom of the table where it shows n 20 Average monthly market return Steps involved Calculate the tstatistic for the coefficient using the formulat ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
The table below shows the average sales (as number sold per day) at grocery store of Product A based on its prices and the prices of a competitor's Product B, where the two competing products and...
-
For each of the following examples, decide whether x is a binomial random variable and explain your decision: a. A manufacturer of computer chips randomly selects 100 chips from each hours production...
-
Which of the following do ergonomics most directly address? Physical wellbeing Mental wellbeing Emotional wellbeing Social wellbeing
-
What role did Tycos corporate culture play in the scandal? On September 12, 2002, national television showcased Tyco Internationals former chief executive officer (CEO) L. Dennis Kozlowski and former...
-
You are tasked with designing a database schema for a Student Learning Management System (LMS) that allows users to enroll in courses, access learning materials, submit assignments, and track their...
-
Clickety Ltd is preparing a master budget for the first quarter of the financial year ending 31 March 2025, and has compiled the following data. 1. The firm sells a single product at a price of $26...
-
1. Are there any losers with the TUI system described in this case? If so, who are they? Is this system justified despite creating losers? 2. Of the five competitive forces discussed in this case,...
-
Identify and evaluate the components of a comprehensive total rewards and motivation system? Illustrate with specific examples.
-
Joseph Randal has just been named the director of alumni relationships at a local university. Alumni donations are an important source of revenue for colleges and universities. If administrators...
-
Aimee is the owner of a stock with annual returns of 12.3 percent, -5.0 percent, 6.6 percent, and 18.2 percent for the past four years. She thinks the stock may achieve a return of 27 percent this...
-
Add a class NumericQuestion to the question hierarchy of Section 9.1. If the response and the expected answer differ by no more than 0.01, accept the response as correct.
-
Write a program that transforms numbers 1, 2, 3, , 12 into the corresponding month names January, February, March, , December. Make a very long string "January February March ...", in which you add...
-
Repeat Exercise E2.10 but apply the darker method of the Color class twice to the object Color.RED. Call your class DarkerDemo. Data from exercise E2.10 In the Java library, a color is specified by...
-
Ideally, a method should have no side effects. Can you write a program in which no method has a side effect? Would such a program be useful?
-
What is the difference between a console application and a graphical application?
-
You are a judge. Melissa has sued Ken claiming that, while Ken was intoxicated, he negligently drove his care down Melissa's street and destroyed rare trees on a lot that Melissa owns, next to her...
-
What are the typical record-at-a-time operations for accessing a file? Which of these depend on the current file record?
-
Graph the relative frequency histogram for the 500 measurements summarized in the accompanying relative frequency table. Class Interval Relative Frequency .52.5 ............... .10 2.54.5...
-
Independent random samples, each containing 800 observations, were selected from two binomial populations. The samples from populations 1 and 2 produced 320 and 400 successes, respectively. a. Test...
-
Refer to the Journal of Applied Psychology (June 2002) completely randomized design study to compare the mean commercial recall scores of viewers of three TV programs, presented in Exercise 10.33 (p....
-
Briefly describe what quality control is all about, and explain the three statistical types of control.
-
Briefly explain the budgetary variances and the way it is used.
-
Briefly describe the two most common types of budget.
Study smarter with the SolutionInn App