Stocks and Treasury bills. The scatterplot in Figure 2.7 (page 96) suggests that returns on common stocks may be somewhat lower in years with high interest rates. Here is part of the output from software for the regression of stock returns on the Treasury bill returns for the same years:

Stock = 16.639318 - 0.67974913 Tbill Sample size: 54 R (correlation coefficient) = -0.113 R-sq = 0.01275773 Estimate of error standard deviation: 17.680649 If you knew the return on Treasury bills for next year, do you think you could predict the return on stocks quite accurately? Use both the scatterplot in Figure 2.7 and a number from the regression output to justify your answer.