Single Index Model: An Excel Implementation
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What formulas in excel do I use for the attached assignment? I am requesting a very, detailed walk through for the attached homework. Perhaps an example completed in the attached and explaination for how the problem was solved. Please use the attachment and summary below to assist me. Thank you. I would very much appreciate your assistance.
1. Using the Single-Index Model and the regression function located under Tools and then Data Analysis in Excel,
calculate alpha, beta, R_squared, and the standard deviation of the error term first for Magellan and then for
Alcoa using the returns in the above table. The required data is provided in the attached excel file.
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Solution Summary
This solution is an illustration of how a single index model can be evaluated by using regression analysis tool in Microsoft Excel. A general explanation of the model and detailed step-by-step procedure for the analysis is provided. The results of the analysis is provided in the excel file.
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General Explanation
The single index model states that the relationship between excess return on an asset and the market index is given by
(1)
where = excess return on the asset; = excess return on the market index ; = alpha , the intercept, = beta, the slope and = the error term
Since all the assumptions of the single index model is identical to that of a regression model, we can use the usual regression computation procedure in the Excel to estimate single index model.
Procedure for Regression Analysis in Excel
1. Enter ...
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