In this CLA 2 assignment, your professor will assign you the stock of a publicly-traded company to conduct the following:
- Download Tesla’s monthly stock price history from yahoo finance or other sources for the past 10 years.
- Select a broad stock market index, such as the S&P 500 Index or the Russell 3000 Index, etc. and download its last 10 years of monthly price history.
- Use the adjusted closing prices of the stock and the index and calculate the monthly rate of return of each.
- Consider the stock’s monthly return as the dependent variable and the index’s monthly return as the independent variable and run the following regression model:
Re = ? + ?*Rm + ? (2)
Where Re is the realized monthly rate of return of your stock, Rm is the realized monthly rate of return on the overall capital market, and ? is the error term.
- After estimating the regression coefficients of equation (2) through the ordinary least square (OLS) method, conduct a test of hypothesis and determine if the estimates of ? and ? are statistically significant at the 5% level and report their t statistics and p values.
- Determine if the F value for the correlation coefficient is statistically significant at the 5% level.
- What is your interpretation of the R-square value? Explain to what extent your regression estimates can predict future return of your stock against your index’s movements.
- What is the estimate of RFR?
- Calculate the value of the error term for each year and construct the histogram of the error terms.
- Using the Explore feature in SPSS (in Excel: Data Analysis, Regression, Normal Probability Plots), conduct a test for normality of the error terms and exhibit the normality plot.
- Does the result of the test for normality of the error terms affect the validity of your regression model? Explain.
- Present an APA-formatted write-up of your finding in one paragraph.
*Refer to the Grading Criteria for Comprehensive Learning Assessments (CLAs) in the University Policies for specific guidelines and expectations.
Part B.
CLA2 Comprehensive Learning Assessment (CLA 2) Presentation
In addition to your CLA2 report, please prepare a professional PowerPoint presentation summarizing your findings for CLA2.
The presentation will consist of your major findings, analysis, and recommendations in a concise presentation of 6 slides (minimum). You should use content from your CLA2 report, part 1, as material for your PowerPoint presentation.
An agenda, executive summary, and references slides should also be included. Please keep in mind that the university is moving towards a more digital footprint for our students.
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