EXERCISE 1

Submitted to- Dr. inderjeet oberoi

Submitted By- Akshay Kushwaha

401508007
1.

BETA P_E ARVIND_STOCK MARKET_SENSEX

 Mean  0.987485  35.84546  284.6762  32768.77
 Median  0.980000  28.19000  339.9750  33567.39
 Maximum  2.000000  99.11000  470.8000  41681.54
 Minimum  0.290000  5.280000  34.95000  22951.83
 Std. Dev.  0.358556  23.71447  139.1352  4838.806
 Skewness  0.467556  0.856788 -0.761549 -0.168214
 Kurtosis  2.930874  2.842010  1.932921  1.875627

 Jarque-Bera  5.971317  20.11220  142.6625  56.81769

 Probability  0.050506  0.000043  0.000000  0.000000

 Sum  160.9600  5842.810  281829.4  32441077

 Sum Sq. Dev.  20.82707  91104.96  19145668  2.32E+10

 Observations  163  163  990  990

 The null hypothesis for the Jarque-Bera test is data is normally distributed
 The alternate hypothesis is data is not normally distributed

Thus, this table of descriptive statistics told us about normality of data

From the table-

 BETA does follow normal distribution.

 P_E data is not normally distributed.
 MARKET_SENSEX data is also not follow normal distribution
 ARVIND_STOCK data is also not normally distributed.

2. Here there is a higher variance in the Beta data. So mean appears to be somewhere around 0.8
and the data is random.

The variance in P/E is

appear to be more than
Beta. So here mean
appears to be somewhere around 40.so the data appears to be quite random and very well
dispersed over a large range.

The data of the price of the stock of Arvind, appears to be quite fair till the 4th quarter of year
2018 but after that it dropped drastically due to some unknown reason after that it went on
decreasing.
Here the Sensex is doing very well and is on the continuous growth but Arvind stock is showing
abnormal and contradicting behavior.

3.

MODEL-A

Dependent Variable: BETA

Method: Least Squares
Date: 04/08/20 Time: 20:47
Sample: 1 163
Included observations: 163
Variable Coefficien Std. Error t-Statistic Prob.  
t
C 1.045403 0.050874 20.54889 0.0000
P_E -0.001616 0.001185 -1.363792 0.1745
R-squared 0.011420     Mean dependent var 0.98748
5
Adjusted R- 0.005280     S.D. dependent var 0.35855
squared 6
S.E. of regression 0.357608     Akaike info criterion 0.79343
4
Sum squared resid 20.58921     Schwarz criterion 0.83139
4
Log likelihood -62.66488     Hannan-Quinn criter. 0.80884
6
F-statistic 1.859928     Durbin-Watson stat 1.97189
4
Prob(F-statistic) 0.174537

MODEL-B

Dependent Variable: ARVIND_STOCK

 Method: Least Squares
Date: 04/08/20 Time: 20:48
Sample: 12/31/2015 1/03/2020
Included observations: 990

Variable Coefficie Std. t- Prob.  

nt Error Statistic
C 775.2612 25.87005 29.96752 0.0000
MARKET_SENSE -0.014971 0.000781 -19.16886 0.0000
X

R-squared 0.271088     Mean dependent 284.67

var 62
Adjusted R- 0.270350     S.D. dependent var 139.13
squared 52
S.E. of regression 118.8487     Akaike info 12.395
criterion 60
Sum squared resid 13955502     Schwarz criterion 12.405
49
Log likelihood -6133.820     Hannan-Quinn 12.399
criter. 36
F-statistic 367.4453     Durbin-Watson stat 0.0084
85
Prob(F-statistic) 0.000000

4. The t-value measures the size of difference relative to the variation in your sample data. Put
another way, t is simply the calculated difference represented in units of standard error. The
greater the magnitude of t, the greater the evidence against the null hypothesis.

Interpretation MODEL A:

 Constant C has p-value for t-test less than 0.05 therefore we can say that this variable is
significant and the true mean is not equal to comparison mean.
 But for the variable P_E the p-value for t-test is much larger than 0.05 therefore we reject
null hypothesis and say that the true mean is equal to comparison mean.

Interpretation MODEL B:

 Constant C has p-value for t-test less than 0.05 therefore we can say that this variable is
significant and the true mean is not equal to comparison mean.
 And for the variable MARKET_SENSEX also the p-value for t-test is less than 0.05
therefore we can say that this variable is significant and the true mean is not equal to
comparison mean.
5. We have to focus on 3 values to accept any equation which are p-value of F-test, R-squared
value and the Durbin-Watson stat value. And the value should be less than 0.05, at least 0.25 and
less than 2 respectively. If all conditions are satisfied then we can accept the equation model.

1. Model A:
1) P-value of F-statistics test = 0.1745 > 0.05 (Rejected)
2) R-squared = 0.01 << 0.25 (Rejected)
3) Durbin-Watson stat = 1.97 ~ 2 (Accepted)

Since the 1st and 2nd conditions fail drastically, this equation model is not significant at
all. Hence model is not significant and rejected.

2. Model B:
1) P-value of F-statistics test = 0.00 < 0.05 (Accepted)
2) R-squared = 0.27 > 0.25 (Accepted)
3) Durbin-Watson stat = 0.00 << 2 (Accepted)

Since all the 3 conditions are satisfied thus this equation model is significant. Hence
model is significant and accepted.