Fill in the blanks and options. 6 Aplia: Student Question X O (2) Corny Jim\'s R

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Fill in the blanks and options.

6 Aplia: Student Question X O (2) Corny Jim's Ring = x : - 6 x + C & O courses.aplia.com/af/servlet/quiz?quiz_action=takeQuiz&quiz;_probGuid=QNAPCOA801010000003b8d7620080000&ctx;=delil.martinez-0003&ck;=m_1511238947626_OAAA6B0... A O A : 5. Using the estimated regression equation for estimation and prediction Aa Aa = Market model is a term used in finance to describe a linear regression model in which the dependent variable is the returm on a stock and the independent variable is the return on the overall market. The market model is sometimes extended to include other independent variables—for example, the return on a specific industry sector. Company A is one of the leading software companies in the world. Suppose an analyst in an investment bank is creating a market model to predict returns on Company A stock from both market and industry returns. The multiple regression model is: Y - Bo + B1X1 + B2x2 +€ where y = daily returns for Company A stock X1 = daily returns for the Dow Jones Industrial Average x2 = daily returns for the NASDAQ Computer Index Returns for the Dow Jones Industrial Average (DJIA) will indicate market returns, while those for the NASDAQ Computer Index (NCI) will indicate industry returns. The analyst estimates the parameters Bo, B1, and B2 using daily returns for the period January 3, 2005, through December 30, 2005. The estimated multiple regression equation is: y = 0.0008 + 0.6404x1 + 0.6869X2 The coefficient 0.6869 in the estimated multiple regression equation is: O The estimated increase in average Company A stock return when the DJIA and NCI retums change by one unit O The estimated average Company A stock return when the DJIA and NCI returns are zero O The estimated change in average Company A stock return for a one-unit change in DJIA return, keeping the NCI return constant O The estimated change in average Company A stock return for a one-unit change in NCI retum, keeping the DJIA return constant Session Timeout 59:12 8:36 PM Hop S X) on 9 3 wi P3 m) - ti 11/202017

Explanation / Answer

(1)

The coefficient 0.6869 in the estimated multiple regression equation is the estimated change in average Company A stock return for a one-unit change in NCI return, keeping the DJIA return constant.

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