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?Bear Markets (Refer to Problem 32, Section 4.1) A bear market is a market condition in which the price of the security falls. A bear market in the sto

Statistics: Informed Decisions Using Data | 5th Edition | ISBN: 9780134133539 | Authors: Michael Sullivan III ISBN: 9780134133539 240

Solution for problem 20 Chapter 14.1

Statistics: Informed Decisions Using Data | 5th Edition

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Statistics: Informed Decisions Using Data | 5th Edition | ISBN: 9780134133539 | Authors: Michael Sullivan III

Statistics: Informed Decisions Using Data | 5th Edition

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Problem 20

Bear Markets (Refer to Problem 32, Section 4.1) A bear market is a market condition in which the price of the security falls. A bear market in the stock market is defined as a condition in which market declines by 20% or more over the course of at least two months. The following data represent the number of months and percentage change in the S&P500 (a group of 500 stocks).

(a) Treating months as the explanatory variable, x, determine the estimates for 0 and 1.

(b) Assuming the residuals are normally distributed, test whether a linear relation exists between the number of months of a bear market and percent change at the  = 0.05 level of significance.

(c) Assuming the residuals are normally distributed, construct a 95% confidence interval for the slope of the true leastsquares regression line.

(d) Based on your results to parts (b) and (c), would you recommend using the least-squares regression line to predict the percent change in the S&P500 during a bear market? Why? What would be a good estimate of the percent change in the S&P500 during a bear market?

Step-by-Step Solution:

Step 1 of 5) Bear Markets (Refer to Problem 32, Section 4.1) A bear market is a market condition in which the price of the security falls. A bear market in the stock market is defined as a condition in which market declines by 20% or more over the course of at least two months. The following data represent the number of months and percentage change in the S&P500 (a group of 500 stocks). (a) Treating months as the explanatory variable, x, determine the estimates for 0 and 1. (b) Assuming the residuals are normally distributed, test whether a linear relation exists between the number of months of a bear market and percent change at the = 0.05 level of significance. (c) Assuming the residuals are normally distributed, construct a 95% confidence interval for the slope of the true leastsquares regression line. (d) Based on your results to parts (b) and (c), would you recommend using the least-squares regression line to predict the percent change in the S&P500 during a bear market Why What would be a good estimate of the percent change in the S&P500 during a bear market

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Chapter 14.1, Problem 20 is Solved
Textbook: Statistics: Informed Decisions Using Data
Edition: 5
Author: Michael Sullivan III
ISBN: 9780134133539

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?Bear Markets (Refer to Problem 32, Section 4.1) A bear market is a market condition in which the price of the security falls. A bear market in the sto