This data set tracks monthly performance of stock in Apple from January 1990 through December 2015, a total of 312 months. The data include returns on the entire stock market, Treasury Bills (short-term, 30-day loans to the government), and inflation. (The column Market Return is the return on a value weighted portfolio that purchases stock in proportion to the size of the company rather than one of each stock.) Formulate the SRM with Apple Return as the response and Market Return as the explanatory variable.

(a) Do these data meet the conditions of the SRM?
(b) Identify the time period associated with each of the two outliers highlighted in this scatterplot. What€™s special, if anything, about these two months?
(c) Which observation is more important to the precision of the estimated slope? That is, if we must drop one of these two but want to keep the standard error of the slope as small as possible, which month should be retained?
(d) Explain why the observation that keeps the t-statistic large is more influential than the other observation.
(e) Explain why removing either observation has little effect on the least squares fit.

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Mcoidn tce 1. 3. 4. a4 02 %3 10 11 02 12 13 14 15 16 17 0.05 19 02 415 -01 20 Market Return 21 Apple Retorn