HW2 official.pdf – HW2 ` library haven library ggplot2 CAPM – read dta C:/Users/cpfri/Desktop/GRAD

y = -0.001167 + 0.8992x beta = 0.8992 Beta is < 1, indicating that the stock is defensive, and its variation is less than the market’s. The expected excess return of the stock is 89.92% GE rGE<-CAPM$ge – CAPM$riskfree modelGE<-lm(rGE~riskmkt,data =CAPM) summary(modelGE) ## ## Call: ## lm(formula = rGE ~ riskmkt, data = CAPM) ## ## Residuals: ##Min1QMedian3QMax ## -0.161385 -0.037402 -0.0039390.0344220.182421 ## ## Coefficients: ##Estimate Std. Error t value Pr(>|t|) ## (Intercept) -0.0011670.004759-0.2450.807 ## riskmkt0.8992600.0987829.104 1.33e-15 *** ## — ## Signif. codes:0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ‘ 1 ## ## Residual standard error: 0.05468 on 130 degrees of freedom ## Multiple R-squared:0.3893, Adjusted R-squared:0.3846 ## F-statistic: 82.87 on 1 and 130 DF,p-value: 1.325e-15 y = 0.006098 + 1.13189x beta = 1.132 Beta is > 1, indicating that the stock is aggressive, and its variation is greater than the market. The expected excess return is 131.89% Microsoft rMsft<-CAPM$msft – CAPM$riskfree modelMS<-lm(rMsft~riskmkt,data =CAPM) summary(modelMS) ## ## Call: ## lm(formula = rMsft ~ riskmkt, data = CAPM) ##