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Changes in Stock Prices Tend to Lag Changes in Level

question 1

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Changes in stock prices tend to lag changes in level of economic activity by several months.


Definitions:

Slope

The measure of the steepness or incline of a line, typically described as the ratio of the vertical change to the horizontal change between two points on the line.

Positive Linear Relationship

A direct correlation between two variables in which they both increase or decrease together at a constant rate, as depicted by a positively sloped line on a graph.

Scatter Diagram

A graphical representation of the relationship between two quantitative variables, showing how one variable is affected by changes in the other variable.

Least Squares Method

A statistical technique used to determine the best-fitting line that minimizes the sum of the squared differences between observed and estimated values.

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