Chapter 13, Problem 85PS

Refer to the discussion of beta values and market models in Problem 13.49 on page 513. The S&P 500 Index tracks the overall movement of the stock market by considering the stock prices of 500 large corporations. The file StockPrices2016 contains 2016 weekly data for the S&P 500 and three companies. The following variables are included:

Cases

WEEK- Week ending on date given

S&P-Weekly closing value for the S&P 500 index.

GE-Weekly closing stock price for General Electric

DISCA- Weekly closing stock price for Discovery Communications

GOOG-Weekly closing stock price for Google

a. Estimate the market model for GE. (Hint: Use the percentage change in the S&P Index as the independent variable and the percentage change in GE’s stock price as the dependent variables.)

b. Interpret the beta value for GE.

c. Repeat (a) and (b) for Discovery Communications.

d. Repeat (a) and (b) for Google.

e. Write a brief summary of your findings.