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 of return on the Standard & Poor's 500-Stock Index and overseas returns by the annual rate of return on the Morgan Stanley EAFE (Europe, Australasia, Far East) index. Both are recorded in percents. Regress the EAFE returns on the S&P 500 returns for the 30 years 1971 to 2000. Here is part of the Minitab output for this regression.

The regression equation is EAFE = 4.76 + 0.663 S&P. "Analysis of Variance" Source DF SS MS F P

Regression= 1, 3445.9, 3445.9, 9.5, 0.005

Residual Error Total= 29, 13598.3

What are the values of the regression standard error s and the squared correlation r 2 ? (Enter your answers to four decimal places.)

s =

r 2 =

Explanation / Answer

standard error s =(MSE)1/2 =(362.59)1/2 =19.0417

r2 =SSR/SST =3445.9/13598.3 =0.2534

df SS MS F P regression 1 3445.9 3445.90 9.50 0.005 residual error 28 10152.4 362.59 total 29 13598.3

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