Question: 65 SUMMARY OUTPUT Dependent Variable: Boeing Monthly Return Hegression

Question

Question: 65 SUMMARY OUTPUT Dependent Variable: Boeing Monthly Return Hegression Stotistics R Square Adjusted R Square Standard Error 0.5204 .2708 0.2696 0.08 623 ANOVA MSF Significonce E 1.53 230.59 0.000 621 622 153 0.01 4.12 5.65 Total Upper 95% 0.01 tStar P-value Lower 95% Coefficients 0.01 Standard Error 2.32 0.0206 0.00 0.00 0.08 15.19 0.0000 1.00 1.29 1.14 S&P Monthly Return An asset manager performs a regression analysis of Boeing's monthly returns against the monthly returns of the Standard and Poor's 500 (S&P 500), a stock market index of 500 large companies. Since the financial market is so volatile, the asset manager decides that it is nearly impossible to foreca st exactly what Boeing's monthly returns will be and therefore asks the team to provide a ge of possible monthly returns for Boeing. The manager wants to cover as many potential outcomes as possible and asks the team to construct a 99.7% prediction interv regression output below, prediction interval for Boeing's monthly returns, assuming that the S&P 500 monthly returns by 3%? Note that percentages are represented as values between 0 and 1. ran al. Given the which of the following options is a reasonable estimate of the 99.7% decline

Explanation / Answer

Answer to the question)

The equation is:

Y = 0.01 + 1.14x

Given: x = -0.03

Thus we get y = 0.01 – 1.14 *0.03

Y = -0.0242

.

The formula of prediction interval is:

y- t * SE * sqrt(1+n) , y + t * SE * sqrt( 1 +n)

.

Y = -0.0242

SE = 0.08

N = 623

Df = 623-1 = 622

T value for 99.7% level and df = 622 is: 2.979

[This value is obtained using excel formula: =T.INV.2T(0.003,622)

.

On plugging all the values we get:

-0.0242 – 2.979 * 0.08 * sqrt(1+623) , -0.0242 + 2.979 * 0.08 * sqrt(1+623)

-5.9974 , 5.9290

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