Linear Regression

This data pertains to the solved example in section 2 of the handout.

Please refer to the handout for the precise details of the problem.

Month Units Produced Monthly Plant Cost prediction value error

1 1260 $123,118.00 118872.654183626 13771.85315
2 1007 $99,601.00
3 1296 $132,000.00
4 873 $80,000.00
5 532 $52,000.00
6 476 $58,625.00
7 482 $74,624.00
8 1273 $110,000.00
9 692 $81,000.00
10 690 $73,507.00
11 564 $95,024.00
12 470 $88,004.00
13 675 $70,000.00
14 870 $110,253.00

slope 64.268697310303

intercept 37894.0955726442

Page 1
 Linear Regression

Chart Title
$140,000.00

$120,000.00
f(x)==0.688202840563914
R² 64.268697310303 x + 37894.0955726442
$100,000.00

$80,000.00 Monthly Plant Cost

Linear (Monthly Plant Cost)
$60,000.00
Linear (Monthly Plant Cost)

$40,000.00

$20,000.00

$0.00
400 500 600 700 800 900 1000 1100 1200 1300 1400

Page 2
 Linear Regression

Monthly Plant Cost

Linear (Monthly Plant Cost)
Linear (Monthly Plant Cost)

Page 3
 Delldata

The worksheet Delldata contains monthly returns for the Standard & Poor's stock index and for Dell stock.
The Beta of the stock is defined as the slope of the least squares line used to predict the montly return for a stock from the m
(1) Estimate the beta of Dell.
(2) Interpret the meaning of Dell's beta.
(3) During a month in which the market goes up 5%, you are 95% sure that Dell's stock price will increase between what ra

Date S and P return Dell return

1-Sep-88 0.042 0.282112845
1-Oct-88 0.027 0.1582397 slope
1-Nov-88 -0.014 -0.08407437 1.763768666
1-Dec-88 0.018 -0.08031774
1-Jan-89 0.072 -0.04990403
1-Feb-89 -0.025 -0.17171717
1-Mar-89 0.024 -0.09512195
1-Apr-89 0.052 0.105121294
1-May-89 0.04 0.079268293
1-Jun-89 -0.005 -0.07344633
1-Jul-89 0.09 -0.14268293
1-Aug-89 0.019 0.036984353
1-Sep-89 -0.004 0.017832647
1-Oct-89 -0.023 -0.15768194
1-Nov-89 0.021 -0.0416
1-Dec-89 0.024 -0.04340568
1-Jan-90 -0.067 -0.15881326
1-Feb-90 0.013 0.350622407
1-Mar-90 0.026 0.219662058
1-Apr-90 -0.025 0.114609572
1-May-90 0.098 0.294915254
1-Jun-90 -0.007 0.147469459
1-Jul-90 -0.003 -0.06920152
1-Aug-90 -0.09 0
1-Sep-90 -0.049 -0.25571895
1-Oct-90 -0.004 0.215148189
1-Nov-90 0.064 0.234869015
1-Dec-90 0.027 0.409656181
1-Jan-91 0.044 0.223144785
1-Feb-91 0.072 0.115825202
1-Mar-91 0.024 0.128897338
1-Apr-91 0.003 -0.17985854
1-May-91 0.043 0.058726899
1-Jun-91 -0.046 -0.01008534
1-Jul-91 0.047 0.173589342

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 Delldata

1-Aug-91 0.024 0.134557596

1-Sep-91 -0.016 0.02324897
1-Oct-91 0.013 -0.25481737
1-Nov-91 -0.04 -0.05519105
1-Dec-91 0.114 0.090277778
1-Jan-92 -0.019 0.243911577
1-Feb-92 0.013 0.094277108
1-Mar-92 -0.02 0.042939719
1-Apr-92 0.029 0.082607548
1-May-92 0.005 0.023647001
1-Jun-92 -0.015 -0.3255537
1-Jul-92 0.04 0.269067797
1-Aug-92 -0.02 0.097662771
1-Sep-92 0.012 0.133840304
1-Oct-92 0.004 0.192041136
1-Nov-92 0.034 0.076894224
1-Dec-92 0.013 0.306165099
1-Jan-93 0.007 -0.0364
1-Feb-93 0.014 -0.30538259
1-Mar-93 0.022 0.093227092
1-Apr-93 -0.025 -0.17438047
1-May-93 0.027 -0.16795409
1-Jun-93 0.003 -0.22281167
1-Jul-93 -0.005 0.07337884
1-Aug-93 0.038 -0.08712242
1-Sep-93 -0.007 -0.09508882
1-Oct-93 0.02 0.217859892
1-Nov-93 -0.009 0.339443742
1-Dec-93 0.012 -0.16588013
1-Jan-94 0.034 -0.02743989
1-Feb-94 -0.027 0.136125654
1-Mar-94 -0.044 0.009984639
1-Apr-94 0.013 -0.12851711
1-May-94 0.016 0.30104712
1-Jun-94 -0.025 -0.07869439
1-Jul-94 0.033 0.061635525
1-Aug-94 0.041 0.160685714
1-Sep-94 -0.024 0.152028358
1-Oct-94 0.023 0.188547009
1-Nov-94 -0.037 -0.03221631
1-Dec-94 0.015 -0.04800119
1-Jan-95 0.026 0.039650328

Page 5
 Delldata

1-Feb-95 0.039 -0.02642643

1-Mar-95 0.03 0.054287477
1-Apr-95 0.029 0.251462844
1-May-95 0.04 -0.07995324
1-Jun-95 0.024 0.193622157
1-Jul-95 0.033 0.081000532
1-Aug-95 0.003 0.184619929
1-Sep-95 0.042 0.103898263
1-Oct-95 -0.004 0.097055945
1-Nov-95 0.044 -0.05092656
1-Dec-95 0.019 -0.21752965
1-Jan-96 0.034 -0.20933457
1-Feb-96 0.01 0.255639977
1-Mar-96 0.01 -0.02541426
1-Apr-96 0.015 0.369376254
1-May-96 0.026 0.207101004
1-Jun-96 0.004 -0.08130598
1-Jul-96 -0.045 0.090954837
1-Aug-96 0.021 0.209467251
1-Sep-96 0.056 0.15826858
1-Oct-96 0.027 0.046631271
1-Nov-96 0.076 0.248839953
1-Dec-96 -0.02 0.045500346
1-Jan-97 0.062 0.244706804
1-Feb-97 0.008 0.075614595
1-Mar-97 -0.042 -0.04919803
1-Apr-97 0.06 0.237519519
1-May-97 0.061 0.34426919
1-Jun-97 0.045 0.04389009
1-Jul-97 0.079 0.456102346
1-Aug-97 -0.056 -0.04020585
1-Sep-97 0.055 0.180506541
1-Oct-97 -0.033 -0.172907
1-Nov-97 0.046 0.050700907
1-Dec-97 0.017 -0.00222362
1-Jan-98 0.011 0.183780952
1-Feb-98 0.072 0.406663073
1-Mar-98 0.051 -0.03127931
1-Apr-98 0.01 0.191881919
1-May-98 -0.017 0.020512693
1-Jun-98 0.041 0.1262766
1-Jul-98 -0.011 0.170033315

Page 6
 Delldata

1-Aug-98 -0.145 -0.07913542

1-Sep-98 0.064 0.315
1-Oct-98 0.081 -0.00380228
1-Nov-98 0.061 -0.07156641
1-Dec-98 0.058 0.203497971
1-Jan-99 0.042 0.366351677
1-Feb-99 -0.031 -0.19875
1-Mar-99 0.04 0.020280811
1-Apr-99 0.039 0.00764526
1-May-99 -0.024 -0.16388467
1-Jun-99 0.056 0.074410163
1-Jul-99 -0.031 0.10472973
1-Aug-99 -0.005 0.194189602
1-Sep-99 -0.027 -0.14340589
1-Oct-99 0.063 -0.04035874
1-Nov-99 0.02 0.07165109
1-Dec-99 0.059 0.186046512
1-Jan-00 -0.05 -0.24632353
1-Feb-00 -0.019 0.061788618
1-Mar-00 0.098 0.321592649
1-Apr-00 -0.03 -0.07068366
1-May-00 -0.021 -0.13965087
1-Jun-00 0.025 0.143478261
1-Jul-00 -0.016 -0.10899873
1-Aug-00 0.062 -0.00711238
1-Sep-00 -0.053 -0.29369628
1-Oct-00 -0.004 -0.04259635

Page 7
 Delldata

nd for Dell stock.

montly return for a stock from the monthly return for the market.

rice will increase between what range of values?

Page 8
 Housedata

The worksheet Housedata contains the sale prices of houses and the size of the houses (in square feet) in Washington.
(1) You are going to build a 500 square foot addition to your house. How much do you think your home value will increase
(2) What percentage of the variation in home value is explained by variation in house size?
(3) A 4000 square feet house is selling for $600,000. Is this price reasonable with the real estate values prevailing in Washi

Square Feet Value

2000 $238,139.37
2200 $259,711.95
2400 $300,953.67
3000 $369,965.73
3200 $340,091.30
3600 $405,425.02
2900 $345,131.03

Page 9
 Housedata

square feet) in Washington.

ink your home value will increase as a result?

estate values prevailing in Washington?

Page 10
 Betadata

The worksheet Betadata contains the monthly returns of the S&P index as well as the monthly returns of Cinergy, Dell, Intel,
Nortel, and Pfizer. Calculate the Beta of each stock.

Cin Dell INTC MSFT NT PFE S and P

1 0.009 0.282 -0.018 0.04507 0.058 0.071 0.042
2 0.035 0.158 -0.1 -0.0621 -0.027 0.051 0.027
3 -0.037 -0.084 -0.192 -0.0359 -0.063 0.003 -0.014
4 0.01 -0.08 0.1875 0.1271 0 0.022 0.018
5 0.012 -0.05 0.0947 0.11966 -0.06 0.003 0.072
6 0 -0.172 -0.01 -0.0021 -0.008 -0.043 -0.025
7 -0.029 -0.095 0.0194 -0.1618 -0.032 0.043 0.024
8 0.048 0.105 0.1047 0.12025 0.167 0.076 0.052
9 0.029 0.079 0.1207 0.08286 -0.007 -0.006 0.04
10 0.042 -0.073 -0.108 -0.124 0.022 -0.059 -0.005
11 0.053 -0.143 0.0518 0.03301 0.134 0.144 0.09
12 -0.009 0.037 -0.016 0.07312 0.106 0.065 0.019
13 0.035 0.018 0.075 0.16593 -0.039 -0.009 -0.004
14 0.038 -0.158 0.0465 0.1934 0.058 -0.015 -0.023
15 0.029 -0.042 0.0296 0.06421 -0.028 0.105 0.021
16 0.029 -0.043 -0.007 0 0.051 -0.062 0.024
17 -0.009 -0.159 0.145 0.06323 0.011 -0.014 -0.067
18 0.004 0.351 0.019 0.06756 0.037 -0.131 0.013
19 -0.028 0.22 0.0373 0.12155 0.021 0.028 0.026
20 -0.03 0.115 -0.054 0.04739 -0.045 -0.064 -0.025
21 0.048 0.295 0.2215 0.25864 0.175 0.172 0.098
22 0.013 0.147 -0.026 0.04108 0 -0.027 -0.007
23 0.058 -0.069 -0.053 -0.125 -0.018 0.181 -0.003
24 -0.072 0 -0.25 -0.0752 -0.12 -0.055 -0.09
25 -0.009 -0.256 -0.004 0.02441 -0.021 -0.005 -0.049
26 0.051 0.215 0.0075 0.01189 0.128 0.03 -0.004
27 0.017 0.235 0.1194 0.13333 -0.024 0.119 0.064
28 -0.008 0.41 0.0266 0.04156 0.097 0 0.027
29 0.009 0.223 0.1883 0.30398 -0.018 0.113 0.044
30 0.047 0.116 0.0437 0.05731 0.059 0.176 0.072
31 0.045 0.129 -0.021 0.0229 0.068 0.019 0.024
32 0.003 -0.18 0.0535 -0.0671 0.116 0.019 0.003
33 0 0.059 0.132 0.10858 0.071 0.086 0.043
34 0.012 -0.01 -0.166 -0.0689 -0.027 -0.057 -0.046
35 0.062 0.174 0.0108 0.07891 0.089 0.115 0.047

Page 11
 Betadata

36 0.004 0.135 0.0532 0.15987 0.003 0.064 0.024

37 0.059 0.023 -0.146 0.04397 -0.016 -0.006 -0.016
38 -2E-05 -0.255 -0.038 0.0548 0.067 0.1 0.013
39 0.064 -0.055 0.0091 0.03595 0.042 -0.069 -0.04
40 0.077 0.09 0.1951 0.14395 0.032 0.266 0.114
41 -0.062 0.244 0.2221 0.0809 0.039 -0.131 -0.019
42 0.003 0.094 0.0604 0.02702 0.029 0.026 0.013
43 -0.027 0.043 -0.13 -0.0405 -0.068 -0.067 -0.02
44 0.034 0.083 -0.032 -0.0696 -0.095 0.029 0.029
45 -0.065 0.024 -0.065 0.0975 -0.04 0.049 0.005
46 0 -0.326 0.14 -0.1322 -0.058 -0.022 -0.015
47 0.088 0.269 0.0483 0.03929 -0.051 0.074 0.04
48 0.003 0.098 -0.029 0.02404 -0.025 -0.01 -0.02
49 0.034 0.134 0.1336 0.08054 -0.066 -0.032 0.012
50 -0.013 0.192 0.0266 0.1025 0.22 0.012 0.004
51 -0.017 0.077 0.0593 0.04929 0.074 0.038 0.034
52 0.026 0.306 0.2168 -0.0832 0.033 -0.072 0.013
53 0.032 -0.036 0.227 0.01317 0.006 -0.09 0.007
54 0.035 -0.305 0.0913 -0.0361 0.012 -0.11 0.014
55 0.005 0.093 -0.013 0.10944 -0.163 0.066 0.022
56 0 -0.174 -0.173 -0.0757 0.003 0.096 -0.025
57 -0.01 -0.168 0.1656 0.08333 -0.031 0.058 0.027
58 0.069 -0.223 -0.008 -0.0499 -0.253 -0.066 0.003
59 0.047 0.073 -0.05 -0.1591 -0.108 -0.112 -0.005
60 0.004 -0.087 0.2297 0.0152 0.132 0.066 0.038
61 0.018 -0.095 0.1012 0.09816 -0.093 -0.056 -0.007
62 0.011 0.218 -0.106 -0.0288 0.169 0.046 0.02
63 -0.061 0.339 -0.028 -0.0016 0 0.075 -0.009
64 0.023 -0.166 0.0081 0.00782 0.083 0.038 0.012
65 -0.02 -0.027 0.0524 0.0558 0.053 -0.063 0.034
66 -0.075 0.136 0.0537 -0.0308 -0.081 -0.096 -0.027
67 -0.02 0.01 -0.018 0.02729 -0.063 -0.069 -0.044
68 -0.029 -0.129 -0.096 0.09143 0.063 0.093 0.013
69 -0.011 0.301 0.0246 0.16218 0.046 0.089 0.016
70 -0.039 -0.079 -0.064 -0.0395 -0.112 -0.01 -0.025
71 0.049 0.062 0.0128 -0.0024 0.167 -0.018 0.033
72 0.006 0.161 0.1097 0.12864 0.097 0.109 0.041
73 -0.006 0.152 -0.065 -0.0344 -0.018 0.013 -0.024
74 0.054 0.189 0.0102 0.1225 0.04 0.072 0.023
75 -0.038 -0.032 0.0161 -0.002 -0.114 0.051 -0.037

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 Betadata

76 0.056 -0.048 0.0119 -0.0278 0.043 0 0.015

77 0.066 0.04 0.0859 -0.0286 0.022 0.058 0.026
78 0 -0.026 0.1496 0.06105 0 0.022 0.039
79 0.01 0.054 0.0642 0.12897 0.11 0.033 0.03
80 0.027 0.251 0.2062 0.14939 -0.04 0.01 0.029
81 0.055 -0.08 0.0965 0.03592 0.055 0.023 0.04
82 -0.009 0.194 0.128 0.06716 -0.049 0.045 0.024
83 0.007 0.081 0.0267 0.00138 0.031 0.099 0.033
84 -0.014 0.185 -0.056 0.0221 -0.023 -0.02 0.003
85 0.088 0.104 -0.02 -0.0216 -0.031 0.081 0.042
86 0.033 0.097 0.162 0.10497 0.011 0.075 -0.004
87 0.035 -0.051 -0.129 -0.1288 0.122 0.015 0.044
88 0.043 -0.218 -0.068 0.00718 0.065 0.086 0.019
89 0.016 -0.209 -0.027 0.05413 0.047 0.087 0.034
90 -0.027 0.256 0.0648 0.06689 0.056 -0.034 0.01
91 0.004 -0.025 -0.033 0.04497 0.005 0.021 0.01
92 -0.033 0.369 0.1911 0.09818 0.079 0.024 0.015
93 0.037 0.207 0.1144 0.04857 0.053 0.032 0.026
94 0.08 -0.081 -0.027 0.01157 0.002 0.009 0.004
95 -0.061 0.091 0.0229 -0.0187 -0.136 -0.017 -0.045
96 0.013 0.209 0.0624 0.03923 0.061 0.016 0.021
97 0.029 0.158 0.1958 0.07653 0.158 0.114 0.056
98 0.088 0.047 0.1512 0.04075 0.128 0.046 0.027
99 0.011 0.249 0.1547 0.14299 0.01 0.087 0.076
100 0 0.046 0.0321 0.05338 -0.059 -0.074 -0.02
101 0.034 0.245 0.2391 0.2345 0.19 0.114 0.062
102 0.013 0.076 -0.126 -0.0441 -0.024 -0.006 0.008
103 -0.011 -0.049 -0.019 -0.0596 -0.09 -0.082 -0.042
104 -0.012 0.238 0.1006 0.32515 0.111 0.141 0.06
105 0.053 0.344 -0.011 0.02058 0.157 0.077 0.061
106 -0.005 0.044 -0.064 0.01915 0.083 0.16 0.045
107 -0.034 0.456 0.2948 0.11869 0.149 0.001 0.079
108 0 -0.04 0.0034 -0.065 -0.052 -0.07 -0.056
109 0.011 0.181 0.0021 0.00094 0.049 0.085 0.055
110 0 -0.173 -0.166 -0.0175 -0.137 0.181 -0.033
111 0.08 0.051 0.0081 0.08846 0.001 0.027 0.046
112 0.075 0 -0.095 -0.0866 -0.012 0.025 0.017
113 -0.1 0.184 0.153 0.15426 0.017 0.096 0.011
114 0.022 0.407 0.1073 0.13615 0.18 0.085 0.072
115 0.059 -0.031 -0.13 0.05605 0.214 0.126 0.051

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 Betadata

116 -0.042 0.192 0.0352 0.00698 -0.058 0.142 0.01

117 -0.073 0.021 -0.116 -0.0589 0.051 -0.078 -0.017
118 0.083 0.126 0.0375 0.27782 -0.113 0.037 0.041
119 -0.098 0.17 0.1392 0.01442 0.037 0.01 -0.011
120 0.117 -0.079 -0.157 -0.1273 -0.193 -0.152 -0.145
121 0.101 0.315 0.2045 0.14723 -0.325 0.137 0.064
122 -0.086 0 0.0401 -0.038 0.335 0.015 0.081
123 0.002 -0.072 0.2066 0.1523 0.091 0.045 0.061
124 -0.005 0.203 0.1017 0.13678 0.071 0.117 0.058
125 -0.076 0.366 0.1888 0.26183 0.263 0.029 0.042
126 -0.068 -0.199 -0.149 -0.1421 -0.08 0.028 -0.031
127 -0.058 0.02 -0.009 0.194 0.07 0.052 0.04
128 0.101 0.008 0.0295 -0.0927 0.098 -0.171 0.039
129 0.145 -0.164 -0.117 -0.0077 0.1 -0.068 -0.024
130 -0.062 0.074 0.1006 0.11774 0.158 0.019 0.056
131 -0.051 0.105 0.1597 -0.0485 0.021 -0.068 -0.031
132 0.015 0.194 0.1912 0.07866 -0.073 0.117 -0.005
133 -0.068 -0.143 -0.096 -0.0216 0.242 -0.05 -0.027
134 0.013 -0.04 0.0421 0.02208 0.214 0.106 0.063
135 -0.104 0.072 -0.01 -0.0164 0.195 -0.075 0.02
136 -0.054 0.186 0.0733 0.28231 0.365 -0.114 0.059
137 0.058 -0.246 0.202 -0.1617 -0.054 0.116 -0.05
138 -0.141 0.062 0.1421 -0.0868 0.212 -0.11 -0.019
139 0.006 0.322 0.1676 0.18881 0.088 0.138 0.098
140 0.244 -0.071 -0.039 -0.3435 -0.111 0.152 -0.03
141 0.012 -0.14 -0.017 -0.103 -0.033 0.058 -0.021
142 -0.045 0.143 0.0722 0.27872 0.261 0.079 0.025
143 0.04 -0.109 -0.001 -0.1273 0.088 -0.096 -0.016
144 0.13 -0.007 0.1216 0 0.098 0 0.062
145 0.125 -0.294 -0.445 -0.1361 -0.259 0.041 -0.053
146 -0.06 -0.043 0.0828 0.14197 -0.246 -0.039 -0.004

Page 14
 Betadata

e monthly returns of Cinergy, Dell, Intel, Microsoft,

Page 15