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Unformatted text preview: Step 3: On your spreadsheet, create some new columns that represent forecasting variables. The simplest thing to do is to define these in terms of the variables already on the spreadsheet. Or, you can enter some other data that you got somewhere else; that would make for some possibly more interesting forecasting exercises. This will be the independent variable in your regression. Be sure, however, that the independent variable was known at the beginning of the interval of price change shown in the same row, so that it is a genuine forecasting variable. Step 4. Run a regression that forecasts the price change (or log price change). Is the t statistic significant? Step 5: Interpret your result, and tell whether you think that you have found a useful? forecasting equation....
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