Zeng turns his attention to developing a regression model to predict stock marke

Question

Zeng turns his attention to developing a regression model to predict stock market returns using the growth rate of GDP. He considers uarterly returns of the S&P; 500 (S&P;) as a proxy for stock market returns and quarterly changes in GDP as GDP growth rate (GDP Growth). The linear regression model is as follows: S&P-p1; (GDP Growth) + ? Zeng develops the following partial ANOVA table and regression statistics based on the last 10 years of quarterly data pertaining to the S&P; 500 and GDP. ANOVA DF SS Regression 1 108 Residuals 38To be calculated Total 39 155.5 Regression Statistics Coefficient Std Error Intercept 0.5125 0.0366 Slope 3.8426 0.0534 The percentage of variation in the S&P; 500 return that can be attributed to variation in GDP growth rate is closest to: A 30.55% B 69.45% ? 100%

Explanation / Answer

Percentage of variation = R-squared value = SSR/SST = 108/155.5 = 0.6945 = 69.45%.

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