In: Statistics and Probability

Listed below in order by row are the annual high values of the Dow Jones Industrial Average for each year beginning with 1980. What is the best predicted value for the year 2006? Given that the actual high value in 2006 was 12,464, how good was the predicted value? What does the pattern suggest about the stock market for investment purposes?

Construct a scatterplot and identify the mathematical model that best fits the given data. Assume that the model is to be used only for the scope of the given data, and consider only linear, quadratic, logarithmic, exponential, and power models

To construct a scatterplot and identify the mathematical model that best fits the given data, you can plot the Dow Jones Industrial Average (y-axis) against the year (x-axis).

Based on the plot, the best fitting model appears to be a quadratic model. A quadratic model is a polynomial equation of the form y = ax^2 + bx + c, where a, b, and c are constants. The curve of a quadratic model is shaped like a parabola.

To find the best predicted value for the year 2006, you can use the quadratic model to predict the Dow Jones Industrial Average for that year. The actual high value for 2006 was 12,464, so you can compare this value to your predicted value to see how good the prediction was.

The pattern in the data suggests that the stock market has been steadily increasing over time. This may be a good indication for investment purposes, as it suggests that the stock market has historically been a profitable place to invest.

However, it is important to note that past performance is not necessarily indicative of future results, and it is always important to do your own research and carefully consider the risks before making any investment decisions.

“The Dow 10 Strategy”
maintains a portfolio of the 10 highest yielding Dow Jones
industrial stocks. Consider the data as per table, for the 25
years.
Compute the average annual returns for the Dow Jones Portfolio
and the Dow 10 Strategy portfolio. Comment about the reward.
Compute the sample standard deviation for each portfolio.
Comment about risk.
Compute the geometric mean Xg of 1+Rj for each
portfolio. Compute (Xg)-1. What does this last number
represent?
is the equation relating least...

Say the level of the market as measured by the Dow Jones
Industrial Average is currently at 12,000. A forecaster has made a
prediction of 13,300 for the level of the market in one year, along
with a 95% confidence interval whose lower bound is 12,500 and
whose upper bound is 14,500. You know from experience that this
particular forecaster tends to be both excessively optimistic and
miscalibrated. Describe how you might debias this individual. Give
a numerical example (making...

“The Dow Jones Industrial Average (DJIA) is simply the average
value of 30 large industrial stocks. Big companies like General
Motors, Goodyear, IBM, and Exxon are the kind of companies that
make up this index” (Lott, 2008)read the What is the Dow Jones
Industrial Average? and the Dow Jones Industrial Average.
Using the structure of the Dow and after reviewing the graphs
for the first and second quarters of the year, describe the
activity that has occurred this year.

One theory concerning the Dow Jones Industrial Average is that
it is likely to increase during U.S. presidential election years.
From 1964 through 2000, the Dow Jones Industrial Average has
increased in eight of the ten US. presidential election years.
Assuming that this indicator is a random event with no predictive
value, you would expect that the indicator would be correct 50% of
the time. What is the probability of the Dow Jones Industrial
Average increasing in eight or more...

An equity portfolio is worth $100 million with the benchmark of
the Dow jones Industrial Average. The Dow is currently at 10,000
and the corresponding portfolio beta is 1.2. The multiplier for the
Dow is 10.
1) Please compute the number of contracts needed to double the
portfolio beta.
2) Please compute the number of contracts needed to cut the beta
in half.

"The Dow Jones Industrial Average is the best indicator of how
well the U.S. economy is doing" Do you agree or disagree with this
statement? Explain why or why not.

The Dow Jones Industrial Average has had a mean gain of 432 pear
year with a standard deviation of 722. A random sample of 40 years
is selected. What is the probability that the mean gain for the
sample was between 250 and 500?
0.669
0.137
0.331
0.863

Consider the daily percent changes of McDonald’s stock price and
those of the Dow Jones Industrial Average for trading days in the
months of July and August 2014. (obtain all graphs and calculations
from excel, but provide manual calculations):
Find the 95% confidence interval for the slope coefficient b1
(so-called bet
Test at the 5% level of significance to see whether or not the
daily percent changes of McDonald’s and of the Dow Jones Index are
significantly associated (in short,...

The S&P 500 and the Dow Jones Industrial Average indices are
proxies for the broader US stock market. You notice one day that
the S&P 500 closed UP by 0.20%, while the DJIA closed DOWN by
0.20%.
Explain how it is possible for one proxy (S&P 500) to have a
positive return while the other (DJIA) has a negative return on any
given day. Include in your explanation some names that could have
caused this discrepancy. Which return (S&P 500...

The S&P 500 and
the Dow Jones Industrial Average indices are proxies for the
broader US stock market. You notice one day that the S&P 500
closed UP by 0.20%, while the DJIA closed DOWN by 0.20%.
Explain how it is
possible for one proxy (S&P 500) to have a positive return
while the other (DJIA) has a negative return on any given day.
Include in your explanation some names that could have caused this
discrepancy. Which return (S&P 500...

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