I used BOFA as a changeable because it is one of JPMs key competitors and has been one of the most constant banks since it was started. I figured since BOFA is a competitor and belongs in the selfsame(prenominal) industry; it whitethorn have similar pattern of returns as JPM.
DATA & ESTIMATED MODEL:
I ran a simple regression using data from the original model, and our result was:
The following atomic number 18 the regression parameters:
JPMRet = .002741862+ .521337247(RM-RF) + .478230691 (BOFA Ret.)
Y= JPM Ret-RF
X= (RM-RF), BOFA Ret.- RF
The output of the regression model is:
T-Test:
employ the data from the first regression, I did a hypothesis examination to determine the significance of our betas.
Ho: B1=B2=B3=0
Ha: At least one of the betas =/= 0.
T-test critical look on (.05, 116) is 1.98.
1. important 1 is accepted because T-test critical value (.05, 116) 1.98> .9445 (T-stat). This gist that Beta 1 is not significantly from 0. This indicates that there are no vicarious or excess returns.
2.Beta 2 is rejected because T test critical value of 1.98 < 6.56 (T-Stat).
This means that Beta 2 is significantly different from 0. This means that JPMs stock returns are dependent on the S&P market returns.
3.Beta 3 is rejected because T test critical value 1.98 > 6.27. This means that Beta 3 is significantly different from 0. This means that JPMs returns do indeed depend on BOFAs returns. This was expected because both belong to the same industry and may be affected by the same Macroeconomic events.
Ramsey determine Test
Restricted model= JPMRet= B1+B2(RM-RF)+B3(BOFA)
Unrestricted= JPMRet= B1+B2(RM-RF)+B3(BOFA) +α2Y2 + α3Y3 + α4Y4
Ho: α2 = α3 = α4...If you want to get a full essay, order it on our website: Ordercustompaper.com
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