Problem
1. What is known as the characteristic line of modern investment analysis is simply the regression line obtained from the following model:
a. A security whose beta coefficient is greater than one is said to be a volatile or aggressive security. Was IBM a volatile security in the time period under study? Hint! Use t statistic to test an appropriate null hypothesis about the coefficient on expected return on the market index.
b. Is the intercept coefficient significantly different from zero? If it is, what is its practical meaning?
c. Construct the confidence interval for both the intercept and the slope parameters.
d. Conduct analysis of variance (ANOVA)
e. Interpret the F test, and explain its relation with t statistic.