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Regression analysis for mutual fund data

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Linear regression analysis; construct confidence intervals for regression parameters; correlation coefficient .

We can use two products at my work, which are mutual funds and see if there is a correlation between the two. The two different funds are: a domestic stock mutual fund, which only invests in large organizations (large cap companies) based here in the US and an international mutual fund, which only invests in large foreign-based companies. We can see the relationships between them and the magnitude of those relationships.

Date: USIFX Monthly 2006 USSPX Monthly 2006
Close Close
Dec 1 27 21.24
Nov 1 28.91 21.05
Oct 2 28.1 20.66
Sept 1 27.54 20.01
Aug 1 27.49 19.59
Jul 3 26.57 19.14
Jun 1 26.01 19.03
May 1 25.84 19.09
Apr 3 26.79 19.65
Mar 1 25.63 19.40
Feb 1 24.90 19.24
Jan 3 24.95 19.19

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Solution Preview

Please see the attachments. Calculations are done in Excel.

The relationship between the two mutual funds can be illustrated in a scatter diagram

The scatter diagram suggests that there is a positive correlation between the two variables. The degree of relationship is measured by the correlation coefficient

Correlation = 0.753011296

Regression Analysis
The regression ...

Solution Summary

The solution contains calculation of regression equation, coefficient of determination, confidence interval for regression coefficients and regression coefficients. Interpretation of the results are also given.

$2.19
Similar Posting

Regression Analysis: Random Selection

The expense ratio of a mutual fund measures the percentage of the fund's assets used to pay for annual administrative overhead. Funds with higher ratios spend more of the fund's return to operate the fund. A random selection of 16 stock mutual funds last year revealed the following data:

Expense Ratio, X
0.62
1.21
1.03
0.67
0.40
1.12
0.78
0.47
0.85
0.92
0.57
0.95
0.20
1.00
1.15
1.03

Total Return, Y
34.3
33.0
31.4
31.8
32.9
27.6
30.3
31.9
33.8
27.9
32.6
24.3
34.3
31.7
29.9
34.7

-Construct a scatter plot of the data. Clearly label each axis.
-Take the scatter plot created earlier and draw the least squares line on it.
-Find the equation for the least squares line of best fit.
-State the values of the regression coefficients (intercept and slope) and interpret what they mean. Does expense hurt or help the fund's return?
-Based on your regression analysis of the data, when is the average total return for a mutual fund with an expense ratio of 0.75%?

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