Simple Linear Regression 15
taBLe 2.1 Monthly Returns of the S&P 500 Stock Index and General Electric
during the Period January 31, 1996, through December 31, 2003
S&P 500 GE S&P 500 GE S&P 500 GE
Jan 31, ’96 0.0321 0.0656 Sep 30, ’98 0.0605 0.0077 May 31, ’01 0.0050 0.0124
Feb 29, ’96 0.0069 –0.015 Oct 30, ’98 0.0772 0.1019 Jun 29, ’01 –0.025 –0.002
Mar 29, ’96 0.0078 0.0391 Nov 30, ’98 0.0574 0.0343 Jul 31, ’01 –0.010 –0.105
Apr 30, ’96 0.0133 –0.006 Dec 31, ’98 0.0548 0.1296 Aug 31, ’01 –0.066 –0.056
May 31, ’96 0.0225 0.0709 Jan 29, ’99 0.0401 0.0307 Sep 28, ’01 –0.085 –0.073
Jun 28, ’96 0.0022 0.0480 Feb 26, ’99 –0.032 –0.041 Oct 31, ’01 0.0179 –0.017
Jul 31, ’96 –0.046 –0.045 Mar 31, ’99 0.0380 0.1050 Nov 30, ’01 0.0724 0.0603
Aug 30, ’96 0.0186 0.0121 Apr 30, ’99 0.0372 –0.042 Dec 31, ’01 0.0075 0.0474
Sep 30, ’96 0.0527 0.0968 May 28, ’99 –0.025 –0.032 Jan 31, ’02 –0.015 –0.072
Oct 31, ’96 0.0257 0.0622 Jun 30, ’99 0.0530 0.1084 Feb 28, ’02 –0.020 0.0443
Nov 29, ’96 0.0708 0.0738 Jul 30, ’99 –0.032 –0.030 Mar 28, ’02 0.0360 –0.024
Dec 31, ’96 –0.021 –0.042 Aug 31, ’99 –0.006 0.0330 Apr 30, ’02 –0.063 –0.163
Jan 31, ’97 0.0595 0.0489 Sep 30, ’99 –0.028 0.0597 May 31, ’02 –0.009 –0.005
Feb 28, ’97 0.0059 –0.004 Oct 29, ’99 0.0606 0.1373 Jun 28, ’02 –0.075 –0.058
Mar 31, ’97 –0.043 –0.028 Nov 30, ’99 0.0188 –0.037 Jul 31, ’02 –0.082 0.1194
Apr 30, ’97 0.0567 0.1154 Dec 31, ’99 0.0562 0.1786 Aug 30, ’02 0.0048 –0.056
May 30, ’97 0.0569 0.0867 Jan 31, ’00 –0.052 –0.141 Sep 30, ’02 –0.116 –0.185
Jun 30, ’97 0.0425 0.0757 Feb 29, ’00 –0.020 –0.003 Oct 31, ’02 0.0829 0.0390
Jul 31, ’97 0.0752 0.0822 Mar 31, ’00 0.0923 0.1754 Nov 29, ’02 0.0555 0.0791
Aug 29, ’97 –0.059 –0.109 Apr 28, ’00 –0.031 0.0160 Dec 31, ’02 –0.062 –0.097
Sep 30, ’97 0.0517 0.0918 May 31, ’00 –0.022 0.0099 Jan 31, ’03 –0.027 –0.046
Oct 31, ’97 –0.035 –0.044 Jun 30, ’00 0.0236 0.0108 Feb 28, ’03 –0.017 0.0488
Nov 28, ’97 0.0436 0.1373 Jul 31, ’00 –0.016 –0.023 Mar 31, ’03 0.0083 0.0645
Dec 31, ’97 0.0156 0.0002 Aug 31, ’00 0.0589 0.1354 Apr 30, ’03 0.0779 0.1469
Jan 30, ’98 0.0100 0.0569 Sep 29, ’00 –0.054 –0.012 May 30, ’03 0.0496 –0.024
Feb 27, ’98 0.0680 0.0038 Oct 31, ’00 –0.004 –0.041 Jun 30, ’03 0.0112 0.0077
Mar 31, ’98 0.0487 0.1087 Nov 30, ’00 –0.083 –0.096 Jul 31, ’03 0.0160 –0.006
Apr 30, ’98 0.0090 –0.010 Dec 29, ’00 0.0040 –0.023 Aug 29, ’03 0.0177 0.0407
May 29, ’98 –0.019 –0.019 Jan 31, ’01 0.0340 –0.028 Sep 30, ’03 –0.012 0.0164
Jun 30, ’98 0.0386 0.0881 Feb 28, ’01 –0.096 0.0159 Oct 31, ’03 0.0535 –0.025
Jul 31, ’98 –0.011 –0.010 Mar 30, ’01 –0.066 –0.087 Nov 28, ’03 0.0071 –0.010
Aug 31, ’98 –0.157 –0.105 Apr 30, ’01 0.0740 0.1569 Dec 31, ’03 0.0495 0.0848
variable or the regressor. In this context, the joint behavior described in the
previous section is now thought of as y being some function of x and possibly
some additional quantity. In other words, we assume a functional relationship
between the two variables given by the equation
yf= ()x (2.1)
which is an exact deterministic relationship.