Description
HPRICE1.DES
price assess bdrms lotsize sqrft colonial lprice lassess
llotsize lsqrft
Obs: 88
1. price house price, $1000s
2. assess assessed value, $1000s
3. bdrms number of bedrooms
4. lotsize size of lot in square feet
5. sqrft size of house in square feet
6. colonial =1 if home is colonial style
7. lprice log(price)
8. lassess log(assess
9. llotsize log(lotsize)
10. lsqrft log(sqrft)
300
370
191
195
373
466.275
332.5
315
206
240
285
300
405
212
265
227.4
240
285
268
310
266
270
225
150
247
275
230
343
477.5
350
230
335
251
235
361
190
360
575
209.001
225
246
713.5
248
230
375
265
313
417.5
253
315
264
255
349.1
351.5
217.7
231.8
319.1
414.5
367.8
300.2
236.1
256.3
314
416.5
434
279.3
287.5
232.9
303.8
305.6
266.7
326
294.3
318.8
294.2
208
239.7
294.1
267.4
359.9
478.1
355.3
217.8
385
224.3
251.9
354.9
212.5
452.4
518.1
289.4
268.1
278.5
655.4
273.3
212.1
354
252.1
324
475.5
256.8
279.2
313.9
279.8
4
3
3
3
4
5
3
3
3
3
4
5
3
3
3
4
4
3
3
4
3
3
3
4
3
3
3
3
7
4
4
4
3
4
4
4
4
5
4
2
3
5
4
3
5
3
3
4
3
4
3
2
6126
9903
5200
4600
6095
8566
9000
6210
6000
2892
6000
7047
12237
6460
6519
3597
5922
7123
5642
8602
5494
7800
6003
5218
9425
6114
6710
8577
8400
9773
4806
15086
5763
6383
9000
3500
10892
15634
6400
8880
6314
28231
7050
5305
6637
7834
1000
8112
5850
6660
6637
15267
2438
2076
1374
1448
2514
2754
2067
1731
1767
1890
2336
2634
3375
1899
2312
1760
2000
1774
1376
1835
2048
2124
1768
1732
1440
1932
1932
2106
3529
2051
1573
2829
1630
1840
2066
1702
2750
3880
1854
1421
1662
3331
1656
1171
2293
1764
2768
3733
1536
1638
1972
1478
1
1
0
1
1
1
1
1
0
0
1
1
1
0
1
1
0
1
1
1
1
1
0
0
1
0
0
1
1
1
1
0
1
1
1
0
1
1
1
0
1
1
1
0
1
1
0
0
1
1
1
0
5.703783
5.913503
5.252274
5.273
5.921578
6.144775
5.80664
5.752573
5.327876
5.480639
5.652489
5.703783
6.003887
5.356586
5.57973
5.426711
5.480639
5.652489
5.590987
5.736572
5.583496
5.598422
5.416101
5.010635
5.509388
5.616771
5.438079
5.83773
6.168564
5.857933
5.438079
5.81413
5.525453
5.459586
5.888878
5.247024
5.886104
6.35437
5.342339
5.416101
5.505332
6.570182
5.513429
5.438079
5.926926
5.57973
5.746203
6.034285
5.53339
5.752573
5.575949
5.541264
5.855359
5.86221
5.383118
5.445875
5.765504
6.027073
5.907539
5.704449
5.464255
5.546349
5.749393
6.031887
6.073044
5.632287
5.661223
5.450609
5.71637
5.722277
5.586124
5.786897
5.684599
5.764564
5.68426
5.337538
5.479388
5.68392
5.588746
5.885826
6.16982
5.872962
5.383577
5.953243
5.412984
5.529032
5.871836
5.358942
6.114567
6.250168
5.66781
5.59136
5.629418
6.485246
5.61057
5.357058
5.869297
5.529826
5.780744
6.164367
5.548297
5.631928
5.749074
5.634075
8.720297
9.200593
8.556414
8.433811
8.715224
9.055556
9.10498
8.733916
8.699514
7.969704
8.699514
8.860357
9.412219
8.773385
8.782476
8.187856
8.68643
8.871084
8.637994
9.05975
8.611412
8.961879
8.700015
8.55987
9.151121
8.718336
8.811355
9.05684
9.035987
9.187379
8.47762
9.621523
8.659213
8.761394
9.10498
8.160519
9.295784
9.657204
8.764053
9.091557
8.750525
10.24818
8.860783
8.576406
8.800415
8.966228
6.907755
9.0011
8.674197
8.803875
8.800415
9.633449
210
180
250
250
209
258
289
316
225
266
310
471.25
335
495
279.5
380
325
220
215
240
725
230
306
425
318
330
246
225
111
268.125
244
295
236
202.5
219
242
198.7
221.5
268.4
282.3
230.7
287
298.7
314.6
291
286.4
253.6
482
384.3
543.6
336.5
515.1
437
263.4
300.4
250.7
708.6
276.3
388.6
252.5
295.2
359.5
276.2
249.8
202.4
254
306.8
318.3
259.4
258.1
232
252
3
3
3
4
4
4
3
4
3
4
6
5
4
4
4
4
4
3
3
3
5
3
2
3
4
3
4
3
4
3
4
3
3
3
2
4
5146
6017
8410
5625
5600
6525
6060
5539
7566
5484
5348
15834
8022
11966
8460
15105
10859
6300
11554
6000
31000
4054
20700
5525
92681
8178
5944
18838
4315
5167
7893
6056
5828
6341
6362
4950
1408
1812
1722
1780
1674
1850
1925
2343
1567
1664
1386
2617
2321
2638
1915
2589
2709
1587
1694
1536
3662
1736
2205
1502
1696
2186
1928
1294
1535
1980
2090
1837
1715
1574
1185
1774
1
1
1
1
1
1
1
0
0
1
1
1
1
1
1
1
0
1
0
1
0
1
0
0
1
1
1
0
1
1
1
1
0
0
0
1
5.347107
5.192957
5.521461
5.521461
5.342334
5.552959
5.666427
5.755742
5.416101
5.583496
5.736572
6.155389
5.81413
6.204558
5.633002
5.940171
5.783825
5.393628
5.370638
5.480639
6.586172
5.438079
5.723585
6.052089
5.762052
5.799093
5.505332
5.416101
4.70953
5.591453
5.497168
5.686975
5.463832
5.31074
5.389072
5.488938
5.291796
5.400423
5.592478
5.64297
5.441118
5.659482
5.69944
5.751302
5.673323
5.65739
5.535758
6.177944
5.951424
6.298213
5.818598
6.244361
6.079933
5.573674
5.705115
5.524257
6.563291
5.621487
5.962551
5.531411
5.687653
5.884714
5.621125
5.52066
5.310246
5.537334
5.726196
5.762994
5.558371
5.553347
5.446737
5.529429
8.545975
8.702344
9.037177
8.634976
8.630522
8.783396
8.709465
8.619569
8.931419
8.60959
8.584478
9.669915
8.989944
9.389825
9.043104
9.622781
9.292749
8.748305
9.354787
8.699514
10.34174
8.307459
9.937889
8.617039
11.43692
9.009203
8.690138
9.843632
8.369853
8.550048
8.973732
8.708805
8.670429
8.754792
8.758098
8.507143
7.798934
7.638198
7.225482
7.277938
7.82963
7.92081
7.633853
7.456455
7.477038
7.544332
7.756196
7.876259
8.12415
7.549083
7.745868
7.473069
7.600903
7.480992
7.226936
7.5148
7.624619
7.661057
7.477604
7.457032
7.272398
7.566311
7.566311
7.652546
8.16877
7.626083
7.36074
7.947679
7.396335
7.517521
7.633369
7.439559
7.919356
8.263591
7.525101
7.259116
7.415777
8.111028
7.41216
7.065613
7.737616
7.475339
7.92588
8.224967
7.336937
7.401231
7.586803
7.298445
7.249926
7.502186
7.451241
7.484369
7.422971
7.522941
7.562681
7.759187
7.356918
7.41698
7.234177
7.869784
7.749753
7.877776
7.557473
7.859027
7.904335
7.369601
7.434848
7.336937
8.205765
7.459339
7.698483
7.314553
7.436028
7.689829
7.564239
7.165493
7.336286
7.590852
7.644919
7.515889
7.447168
7.361375
7.077498
7.480992
ECON 341
Multiple Regression Practice Problems
In Class Exercise
(1) Complete the following.
(2) Examine the t-statistics for this regression. What do you see?
(3) Write out the results of the estimation in equation form, with standard errors in parenthesis
below the coefficients.
(4) Use the data to create four different estimates:
a. Include square footage only
b. Include square footage and bedrooms
c. Include square footage, bedrooms, and lot size
d. Include square footage and the variable ?colonial.?
Create a table similar to the table in Example 4.6 in your textbook to report the results of your
three regressions.
FIN 322 ? Investments & Portfolio Management
Module 2: Securities Markets
Summary
This module covers securities markets and the mechanics of buying securities. Securities are
traded on organized exchanges, such as the NYSE, or in the informal OTC markets, including
the Nasdaq stock markets. Securities are primarily bought through brokers, who buy and sell for
their customers? accounts. The brokers obtain securities from dealers, who make markets in
them. These dealers offer to buy and sell at specified prices (quotes), which are called the bid
and the ask. Brokers and investors obtain these prices through a sophisticated electronic system
that transmits the quotes from various dealers.
After securities are purchased, the investor must pay for them with either cash or a combination
of cash and borrowed funds. When the investor uses borrowed funds, that individual is buying on
margin. Buying on margin increases both the potential percentage return and the potential risk of
loss for the investor.
Investors may take delivery of their securities or leave them with the brokerage firm. Leaving
securities registered in the street name offers the advantage of convenience because the
brokerage firm becomes the custodian of the certificates. Since the advent of the SIPC and its
insurance protection, there is little risk of loss to the investor from leaving securities with the
brokerage firm.
Investors establish long or short positions:
? With a long position, the investor purchases stock in anticipation of its price rising. If the
price of the stock rises, the individual may sell it for a profit.
? With a short position, the individual sells borrowed stock in anticipation of its price
declining.
? If the price of the stock falls, the individual may repurchase it at the lower price and
return it to the lender. The position generates a profit because the selling price exceeds
the purchase price.
? Both the long and short positions are the logical outcomes of security analysis. If the
investor thinks a stock is underpriced, a long position (i.e., the purchase of the stock)
should be established. If the investor thinks a stock is overvalued, a short position would
be sensible. If the investor is correct in either case, the position will generate a profit.
Either position may, however, generate a loss if the prices move against the investors?
position.
Investors living the United States should consider a global view and acquire stocks and bonds
issued in foreign countries. These securities may be bought and sold through U.S. brokers in
much the same way that investors acquire domestic securities. ADRs representing foreign
securities have been created to facilitate trading in foreign stocks. These ADRs are denominated
in dollars, their prices are quoted in dollars, and their units of trading are consistent with those in
the United States.
1|Page
Federal laws governing the securities industry are enforced by the SEC. The purpose of these
laws is to ensure that individual investors have access to information upon which to base
investment decisions. Publicly owned firms must supply investors with financial statements and
make timely disclosure of information that may impact the value of the firms? securities.
Investors? accounts with brokerage firms are insured by the SIPC. This insurance covers up to
$500,000 worth of securities held by the broker for the investor. The intent of SIPC is to increase
public confidence in the securities industry by reducing the risk of loss to investors from failure
by brokerage firms.
A firm may acquire funds indirectly through a financial intermediary such as a commercial bank.
Financial intermediaries issue liabilities (e.g., deposits) to acquire funds and subsequently lend
the funds to firms, governments, and individuals who need the money. Firms may acquire funds
directly by selling securities to the general public.
When a firm issues new securities, it usually employs the services of an investment banker to
facilitate the sale through an IPO. The investment banker acts as a middleman between the firm
and the investors. In many cases, the investment bankers underwrite the issue of new securities;
they buy the securities and then sell them to the general public, guaranteeing the issuing firm a
specified amount of money. Because the underwriters are obliged to remit the specified amount
of money, they bear the risk of the sale. The market for IPOs has been volatile. The prices of
some new issues rise dramatically but then subsequently fall.
Key Website:
1. Find information on pending IPOs at sites such as:
a. MarketWatch?s IPO Calendar: https://www.marketwatch.com/tools/ipo-calendar
b. IPO Monitor: www.ipomonitor.com
2|Page
Questions
1. What is the difference between each pair of items?
a. Listed versus unlisted securities
b. Brokers and market makers
c. Full-service and discount brokerage firms
d. Primary and secondary markets
e. Market order and good-till-canceled order
f. Cash account and margin account
2. When would you use a stop-loss order?
3. Why is it riskier to buy stock on margin?
4. The following questions concern short selling:
a. When should an investor sell short?
b. How can investors sell stock they do not own?
c. How is a short position closed?
d. How does the investor profit from a short sale?
e. What is the risk associated with a short position?
5. How are the SIPC and FDIC similar? Why are securities laws frequently referred to as
full disclosure laws and what is the role of the SEC?
6. In an underwriting, what role does each play?
a. Investment banker
b. Syndicate
c. Preliminary and final prospectus
d. The SEC
7. What is the difference between an underwriting and ?best-efforts? sale of securities? Who
bears the risk associated with each sale? If the investment banker overprices a new issue
of securities, who sustains the loss?
Fill in the Blank
1. An increase in the spread _____________ the cost of investing.
2. Using an online broker firm instead of a full-service brokerage firm _____________
commissions.
3. An increase in the margin requirement ___________ the funds an investor must initially
remit.
4. A reduction in the margin requirement _____________ the amount an investor may
borrow to purchase a stock.
5. Buying stock on margin ___________ the potential percentage return on an investment
and ____________ risk.
6. If the price of a stock purchased on margin declines, the percentage loss on the
investment ________________.
7. If an investor buys stock on margin and its price subsequently increases, the required
amount of margin __________.
8. An increase in the ?spread? _____________ the cost of investing.
9. An increase in the use of online trading ______________ commission costs.
3|Page
10. If the price of a stock rises after an investor sells the stock short, the loss on the
transaction ________________.
11. If a company raises the dividend, the potential loss on a short position in the stock
_____________.
12. SIPC insurance ____________ the risk to the individual investor associated with a
brokerage firm failure.
Starter Problem
Suppose the starting price is $50 and the ending price is either $70 or $30, for a change in return
of $20. What is the percentage return for each transaction?
1. You buy the stock for $50 and sell it for $70.
2. You buy the stock for $50 and sell it for $30.
3. You buy the stock on margin for $50 and sell it for $70; the margin requirement is 60%.
4. You buy the stock on margin for $50 and sell it for $30; the margin requirement is 60%.
5. You buy a stock on margin for $50 and sell it for $70. The margin requirement is 60%
and the interest rate on borrowed funds is 10%.
6. You sell the stock short for $50 and repurchase it for $70.
7. You sell the stock short for $50 and repurchase it for $30.
Case
Two brothers, Victor and Darin, could not be more different. Victor is assertive and enjoys
taking risks. Darin is reserved and risk averse. Both have jobs that pay well and provide fringe
benefits, including medical insurance and pension plans. You are the executor of their
grandfather?s estate and know that each brother will inherit $85,000 from the estate. Neither
needs the cash immediately. It will be invested to meet some long-term financial goal.
Once the funds have been received, you expect Victor to acquire some exceedingly risk
investment. Darin may choose a low-yielding bank savings account. Neither alternative makes
financial sense to you so before you distribute the funds, you decide to offer financial
suggestions. This would reduce Victor?s risk exposure and increase Darin?s potential return.
Given the brothers? ages and financial condition, you believe that equity investments are
appropriate. Such investments may satisfy Victor?s propensity to take risks and increase Darin?s
potential return without excessively increasing his risk exposure. Currently, the stock of Choice
Juicy Fruit is selling for $60 a share and pays an annual dividend of $1.50 a share. The
company?s line of low-to-no sugar juice offers considerable potential. The margin requirement
set by the Federal Reserve is $50 and pays an annual dividend of $1.50 per share. Brokerage
firms are charging 7% on funds used to purchase stocks on margin. While commissions vary
among brokers, you decide that $70 for a 100-share purchase or sale is a reasonable amount to
use for illustrative purposes. Currently, commercial banks are only paying 3% on savings
accounts.
1. What is the percentage return earned by Darin if he acquires 100 shares, holds the stock
for a year, and sells it for $80?
4|Page
2. What is the percentage return earned by Victor if he acquires 100 shares on margin, holds
the stock for a year, and sells the stock for $80? What advantage does buying stock on
margin offer Victor?
3. What would be the percentage returns if the sale prices had been $50 or $100?
4. Must the two brothers leave the stock registered in street name? If not, what would be the
advantage of leaving the stock with the broker? Does leaving the stock increase their risk
exposure?
5. What would be the impact on the brothers? returns if the rate of interest charged by the
broker increases to 10%?
6. If the maintenance margin requirement were 30% and the price of the stock declined to
$50, what impact would that have on each brother?s position? At what price of the stock
would they receive a margin call?
7. Why would buying the stock be more advantageous to both brothers than the alternatives
you anticipate them to select?
Text me on whats app I will send u some videos
+966542089917
5|Page
Purchase answer to see full
attachment
