Suppose now we are interested in analyzing the behavior of stock price of Microsoft using linear regression analysis. Below at the end there is an Excel dataset that contains ten years’ historical data of daily closing prices of Microsoft (MSFT), S&P500 and GE.

(a). Obtain scatterplots of three variables included, and discuss whether there exists an obvious graphical linear relationship between each pair of the variables. [Note: Using Excel, you need to create three scatter plots separately and list them together.]

(b). Using the data given, develop three regression models (two simple linear regression models and one multiple regression model). Write down all models. [Note: you must copy and paste the outputs from Excel regression analysis].

(c). Based on the outputs of three models, which one performs the best in fitting the data given, and why?

(d). What is the R2 of the best regression model you identified in (c)? Please interpret its meaning.

MSFT	SP500	GE
2.52	469.1	6.72
2.5	468.44	6.69
2.45	463.02	6.64
2.38	457.49	6.46
2.45	459.57	6.49
2.45	460.21	6.46
2.44	460.33	6.51
2.53	463.72	6.52
2.55	465.39	6.47
2.51	463.75	6.5

Answer rating: 100% (QA)

MSFT SP500 GE 252 4691 672 25 46844 669 245 46302 664 238 45749 646 245 45957 649 245 46021 646 244 46033 651 253 46372 652 255 46539 647 251 46375 65 256 46674 665 252 46481 666 25 46362 672 25 4626 ... View the full answer