Consider the provided details to solve the subparts.

According to the provided details, the

dependent variable is the total return for the stock and the independent variable is the
total return for the stock market.
Consider the provided data in the WEB file to compute the descriptive statistics for each
stocks and the S&P 500. To compute the descriptive statistics for each stocks and the
S&P 500 use Minitab software, the procedure is given as below:
1. Open the Provided Minitab file WEB file Beta. The screenshot of the Minitab
worksheet is given as below:

2. Click on the Stat basic statistics and select Display descriptive statistics, a new
dialog box will appear. Select the variables as given below screenshot:

3. Click on the Statistics option in the above dialog box, a new dialog box will appear.
Select the options as given below screenshot:

4. Press Ok twice in the above dialog box. The screenshot of the obtained descriptive
statistics is given as below:

According to the above descriptive statistics, the mean of the stock market S&P 500 is
0.01010. The mean monthly return of the stock market (S&P 500) is less than the mean
monthly return of the six stocks (Exxon Mobil, caterpillar, McDonalds, SanDisk,
Qualcomm and Procter & gamble) and greater than the two stocks (Microsoft and
Johnson & Johnson). The standard deviation is the measure dispersion of the data from
its mean. The highest standard deviation is 0.1954, so SanDisk can be consider as the
most volatile stock. The standard deviation of the stock market is 0.02633 which is less
than the standard deviation of seven stocks (Exxon Mobil, caterpillar, McDonalds,
Qualcomm, Procter & gamble, Microsoft and Johnson & Johnson). So, all of the stocks
are more volatility than the stock market (S&P 500).
(b)
Consider the provided details and the Minitab output to explain each of the parameter.
The estimated least squares regression equation is given by:
y x

where is the estimate of slope. The dependent variable y depends on the explanatory
variable x . The most important part of the above regression line is the slope which
depicts the change in predicted value of y due to one unit change in variable x .

To compute value of
for each stock, use Minitab software. The procedure is given
as below:
1. Click on the Regression, and select the Regression option, a new dialog box will
appear. Select the response variable as Microsoft and the predictor variable as S&P
500. The screenshot is given as below:

2. Click on the Ok option in the above dialog box, the screenshot of the obtained
regression output is given as below:

Similarly calculate the regression line for the response variable Exxon Mobil and the
predictor S&P 500, the screenshot of the obtained regression analysis is given as below:

Similarly calculate the regression line for the response variable Caterpillar and the
predictor S&P 500, the screenshot of the obtained regression analysis is given as below:

Similarly calculate the regression line for the response variable Johnson & Johnson
and the predictor S&P 500, the screenshot of the obtained regression analysis is given
as below:

Similarly calculate the regression line for the response variable McDonalds and the
predictor S&P 500, the screenshot of the obtained regression analysis is given as below:

Similarly calculate the regression line for the response variable SanDisk and the
predictor S&P 500, the screenshot of the obtained regression analysis is given as below:

Similarly calculate the regression line for the response variable Qualcomm and the
predictor S&P 500, the screenshot of the obtained regression analysis is given as below:

Similarly calculate the regression line for the response variable Procter & Gamble and
the predictor S&P 500.

The screenshot of the obtained regression analysis is given as below:

According to the above outputs, the beta for the each stock is given as below:
Stock
Microsoft
Exxon Mobil
Caterpillar
Johnson & Johnson
McDonalds
SanDisk
Qualcomm
Procter & Gamble

Value of beta
0.458
0.731
1.49
0.009
1.50
2.60
1.41
0.507

for the stock SanDisk is highest (2.60) so it will perform best in an up

for the stock Johnson & Johnson is least (0.009) so it will
market and the value of
The value of

perform best in downward market. The values of beta of Microsoft, Exxon Mobil and
Proctor & Gamble are less than 1 which indicates the stocks of Microsoft, Exxon Mobil
and Proctor & Gamble less volatile than the market stock. And the values of beta of
Caterpillar, McDonalds, SanDisk and Qualcomm are greater than 1 which indicates the
stocks of Caterpillar, McDonalds, SanDisk and Qualcomm more volatile than the
market stock.
(c)
Consider the regression analysis obtained in the part (b) for each of the stock to explain
the rerun for the individual stocks is explained by the market. The calculated value of
R 2 for each of the stock from part (b) is given as below:
Stock
Microsoft
Exxon Mobil
Caterpillar
Johnson &
Johnson
McDonalds
SanDisk
Qualcomm
Procter & Gamble

Value of R-square
7.1%
12.1%
32.9%
0.0%
33.8%
12.3%
18.7%
12.9%

The R -square is known as coefficient of determination, which indicates the proportion of

the total variation explained by the regression line. According to the above table, the
value of R -square for Microsoft is 0.071. It means that 7.1% of the variation in the
Microsoft stocks is explained by the explanatory variables (Stock market) in the
regression equation and rest 92.9 % remains unexplained.
The value of R -square for Exxon Mobil is 0.121. It means that 12.1% of the variation in
the Exxon Mobil stocks is explained by the explanatory variables (Stock market) in the
regression equation and rest 87.9 % remains unexplained. The value of R -square for
Caterpillar is 0.329. It means that 32.9% of the variation in the Caterpillar stocks is
explained by the explanatory variables (Stock market) in the regression equation and rest
67.1% remains unexplained. The value of R -square for Johnson & Johnson is 0.0. It
means that 0% of the variation in the Johnson & Johnson stocks is explained by the
explanatory variables (Stock market) in the regression equation and rest 100% remains
unexplained. The value of R -square for McDonalds is 0.338 It means that 33.8% of the
variation in the McDonalds stocks is explained by the explanatory variables (Stock
market) in the regression equation and rest 66.2% remains unexplained.
The value of R -square for SanDisk is 0.123. It means that 12.3% of the variation in the
SanDisk stocks is explained by the explanatory variables (Stock market) in the regression
equation and rest 87.7% remains unexplained. The value of R -square for Qualcomm is
0.187. It means that 18.7% of the variation in the Qualcomm stocks is explained by the
explanatory variables (Stock market) in the regression equation and rest 81.3% remains
unexplained. The value of R -square for Procter & Gamble is 0.129. It means that
12.9% of the variation in the Procter & Gamble stocks is explained by the explanatory
variables (Stock market) in the regression equation and rest 87.1% remains unexplained.