How are returns on common stocks in overseas markets related to returns in U.S.

Question

How are returns on common stocks in overseas markets related to returns in U.S. markets? Measure U.S. returns by the annual rate on the standard & Poor's 500-stock Index and overseas returns by the annual rate of return of the Morgan Stanely EAFE (Europe, Australasia, Far East) index. Both are recorded in percents. Regress the EAFE returns on the S&P; 500 returns for the 22 years 1978 to 2000. Here is a part of the output for this regression. The regression equation is EAFE = 5.98 + 0.599 S&P.; (Round your answer for F to two decimal place and your answers for SS and MS to one decimal place.) for Complete the analysis of variance by filling in the missing boxes. What is s? What is r^2?

Explanation / Answer

df _ resiual error = 21 -1 = 20

SS _resiual error = 13437.8 - 1464.5 = 11973.3

MS_resiual error = 11973.3 / 20 = 598.665

F = MS _ regression / MS _ residual erro = 1464.5/598.665 = 2.446276

r^2 =   SS(Regression) / SS(Total). = 1464.5 / 13437.8 = 0.108983

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