Question: A capital asset pricing model (CAPM) for Johnson & Johnson (J&J) was discussed in Example 12.10 in Chapter 12. The model uses the risk-adjusted stock

A capital asset pricing model (CAPM) for Johnson & Johnson (J&J) was discussed in Example 12.10 in Chapter 12.

The model uses the risk-adjusted stock return R - Rf for J&J as the response variable and the risk-adjusted market return RM - Rf as the explanatory variable. The data for the model, labeled Johnson_Johnson, can be found on the text website. Since serial correlation may occur with time series data, it is prudent to inspect the behavior of the residuals.

Construct a scatter plot of the residuals against time to comment on correlated observations.

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