The Daily Rate of Return of the Stock Market as a Whole

question 61

Multiple Choice

the daily rate of return of the stock market as a whole, measured by the daily rate of return of Standard \& Poor's (S\&P) 500 Composite Index. Using a random sample of $n = 12$ days from 2007, the least squares lines shown in the table below were obtained for four firms. The estimated standard error of $\hat { \beta } _ { 1 }$ is shown to the right of each least squares prediction equation.
$\begin{array}{llc}\hline \text { Firm } & \text { Estimated Market Model } & \text { Estimated Standard Error of } \beta 1 \\\hline \text { Company A } & y=.0010+1.40 x & .03 \\\text { Company B } & y=.0005-1.21 x & .06 \\\text { Company C } & y=.0010+1.62 x & 1.34 \\\text { Company D } & y=.0013+.76 x & .15 \\\hline\end{array}$
Calculate the test statistic for determining whether the market model is useful for predicting daily rate of return of Company A's stock.

• A) 46.7
• B) 161.6
• C) 1.40
• D) 1.40 ± .067