Find the association between the mean stock returns expected by individual investors during the 12 months and the actual return during the preceding 12 months. How strong is the association? (What is the R-Squared?). Draw the regression line and scatter diagram. Using regression, find the association between the mean stock returns expected by individual investors during the following 12 months and actual returns during the 12 months. What association do you see? How strong is the association? (What is the R-Squared?).

Draw the regression line and scatter diagram. What do the results from questions 1 and 2 tell us about what influences the return forecasts of individual investors, and how accurate their return forecasts are?