Question

Here is the monthly stock price data for Ford Corp. and GM corp:

Prices for Ford and GM stock

Date   Ford GM

8-Nov-99 24.44 66.08

1-Dec-99 25.79 65.09

3-Jan-00 24.32 72.14

1-Feb-00 20.35 68.54

1-Mar-00 22.45 74.63

3-Apr-00 27.00 84.37

1-May-00 23.95 64.02

1-Jun-00 22.08 52.63

3-Jul-00 24.17 51.61

1-Aug-00 21.95 63.97

1-Sep-00 23.14 59.40

2-Oct-00 23.98 56.77

1-Nov-00 20.89 45.64

1-Dec-00 21.52 46.96

2-Jan-01 26.16 49.51

1-Feb-01 25.30 51.77

1) What are the monthly returns for Ford and GM in April 00?

2) What is the covariance between returns of Ford and GM?

3) What is the slope of the regression?

4) What is the value of the intercept?

5) What is the r-squared of the regression?

Answer 1

1. The monthly return of Ford and GM in April are 27.00 and 84.37 respectively.

2. The covariance between returns ford and GM is 5.56

3. The slope of the regression is 0.049 (From regression table)

4. The value of the intercept is 20.593 (From regression table)

5. The R-Square of the regression is 0.078 or 7.8%