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**Unformatted text preview: **returns on the y-axis and the market
returns on the x-axis. We also used the menu Chart > Options to add a trend line, and to
display the regression equation and R2 on the chart. The chart is shown below. We also
used the regression feature to get more detailed data. These results are also shown below. GE Analysis
The beta coefficient is about 1.10, as shown by the slope coefficient in the regression
equation on the chart. The beta coefficient has a t statistic of 7.07, and there is virtually a
zero chance of getting this if the true beta coefficient is equal to zero. Therefore, this is a
statistically significant coefficient. However, the confidence interval ranges from 0.78 to
1.41, which is very wide. The R2 of about 0.51 indicates that 51% of the variance of the
stock return can be explained by the market. The rest of the stock's variance is due to
factors other than the market. This is consistent with the wide scatter of points in the
graph.
GE Reg ression Results
(See columns J-N)
Beta
Coefficient
1.09
t statistic
5.96
Probability of t stat.
0.0%
Lower 95% confidence interval
0.72
Upper 95% confidence interval
1.4 6 Histor ic Re aliz e d Re tu rns
on GE , rj(%)
30% f(x) = 1.0924 232783x + 0.0052517018
R² = 0.4357997758
20% Intercept
Coefficient
t statistic
Probability of t stat.
Lower 95% confidence interval
Upper 95% confidence interval 10% 0%
-30% - 20% -10% 0% 10% 20% 0.01
0.56
57.6%
-0.01
0.02 30% H ist oric Re aliz ed Re t urns
on t he Market ,
rM(%) -10% -20% Mag ellan Analysis The beta coefficient is about 1.04, as shown by the slope coefficient in the regression
equation on the chart. The beta coefficient has a t statistic of 42.22, and there is virtually a
zero chance of getting this if the true beta coefficient is equal to zero. Therefore, this is a
statistically significant coefficient. The confidence interval ranges from 0.99 to 1.09, which
is very small compared to the confidence interval for a single stock. The R2 of about 0.97
indicates that 97% of the variance of the...

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