Discuss the below:
Q: We will run a regression to test whether the Random Walk Model describes daily adjusted closing prices for StockA. Use the adjusted daily closing prices for this regression, rather than the daily percentage changes. Create a new column of data that represents the one-day lagged (i.e. the "t-1") values of the stock.{suggestion: set up the lagged column using Excel; if you're working with Stata, copy and paste new variable into the Data Editor.}
Create a scatterplot with StockA(t) on the Y-axis and Stock A(t-1) on the horizontal, and comment on the pattern formed by the points.
Estimate the best fit line for this model, and use the reported Confidence Intervals for the slope and intercept to decide if the Random Walk model can credibly account for the pattern of daily prices (i.e. compare α = 0 and β = 1 to your intervals). Comment on your conclusions and possible underlying reasons for your result. If the stock is following a Random Walk, what implications might this have for your client?
Attachment:- Table data.rar