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Unformatted text preview: 6. Assumption 4 is checked by plotting the residuals in a histogram. The histogram is unimodal so the assumption holds. RESI1 Frequency 140 20-100 7 6 5 4 3 2 1 Histogram of RESI 1 7. It is clear that the first three assumptions do not hold up to testing so the answers in project 8 would be invalidated. 8. The leverage points are equal to Hi > 2p/n. With 2 parameters the leverage point is 4/18 or .2222. There is one leverage point in the 13 th year when the S&P experienced a 23% decline. There are no outliers 9. The leverage points represent the year that has an extremely good or bad performance in S&P500 returns. 10. When the leverage point is removed from the data the new regression analysis shows a change in the regression line. S&P APPL 40 30 20 10-10-20 250 200 150 100 50-50-100 Scatterplot of APPL vs S&P...
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This note was uploaded on 02/23/2010 for the course BUAD 310 at USC.