Part 2: Data analysis (40marks)
Using any data analysis tool of your choice, examine the case-study and answer the questions below:
The Dow Jones Industrial Average (DJIA) and the Standard & Poor (S&P) 500 Index are both used as measures of overall movement in the stock market. The DJIA is based on the price movements of 30 large companies; the S&P 500 is an index composed of 500 stocks. Some say the S&P 500 is a better measure of stock market performance because it is broader based. The closing price for the DJIA and the S&P 500 for 10 weeks, beginning with
February 11,2000 are shown (Barron’s April 17, 2000)
Dow Jones S&P 500
11-Feb 10425 1387
18-Feb 10220 1346
25-Feb 9862 1333
31-Mar 10367 1409
10-Mar 9929 1395
17-Mar 10595 1464
24-Mar 11113 1527
31-Mar 10922 1499
7-Apr 11111 1516
14-Apr 10306 1357
Note: Consider DJIA as the independent variable
1. Develop a scatter diagram for these data and interpret the same.
2. Compute the sample correlation coefficient for these data.
3. Are they poorly correlated, or do they have a close association?
4. Develop the least squares estimated regression equation
5. Compute the coefficient of Determination? Would you recommend the regression model for the purpose of estimation?