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ⅰ. TESCO-Time trend regression model at price level

Modelling TESCO price level using the OLS method using PC Give output

The equation for Tesco is

P=40092-0.162778*time

(4.25) (-4.24)

NOTE: Standard error are given in brackets

Time Trend Regression Model

Variable Coefficient

Constant 40092 (4.25)

Time trend -0.162778 (-4.24)

R-squared 0.545534 No. of reservation 17

NOTE: t-value is shown in the brackets.

Hypothesis Testing

Setting up the null hypothesis

H0: β2=0 and H1: β2≠0 (two-tailed, 5% significance level) t= -0.162778/0.03836=-4.24

The reject area is where t-value is less than-1.96 or greater than 1.96 in the two -tail test.

Therefore, we reject the null hypothesis H0 here because the t=-4.24 is within the reject area, estimate of coefficient b is statistical significant.

Overall, the price of TESCO has a downward trend by -0.16 each month. What’s more, the time trend regression model is statistical significant-beta coefficient. According to the R-squared figure, 54.6% of price change in TESCO is explained by the movements in time trend.

ⅱ)Time trend regression model for Barclays

Modelling the BARC price level using OLS method

The equation for BARC is P=439960-0.179062t (3.00) (-3.00)

Time Regression Model

Dependent variable: the share price of Barclays.

Variable Coefficient

Constant 439960 (3.00)

Time trend…...

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