Group Assignment Completed

Name: Oui Qiao Ying (J16022001)
Wong Jia Min (J16022443)
Lim Heng Yi (J14016728)
Eshwarr Vishnodev (J17024968)
Section: B1
Program: BBSNHU
Subject: ECO 402S
Topic: ANALYSING THE CHARACTERISTIC LINE
OF MODERN INVESTMENT ANALYSIS
Lecturer: Ms Alison Chiu
Date of Submission: 10th March 2020
Introduction
Market model in finance is that the return on a security depends on the return of the
market portfolio and the extent of the security’s responsiveness as measured by beta
(Nasdaq,2020). Capital Asset Pricing Model (CAPM) is one of the market models in finance
commonly used by investors or businesses. It describes the relationship between systematic
risk and expected return for assets and stocks. CAPM is widely used throughout finance for
pricing risky securities and for generating expected returns for assets given the risk of those
assets and cost of capital. It is a better return model as it considers systematic risk, reflecting
a reality which is normally ignored by other models, to calculate the cost of equity. In the
formula of CAPM, the beta refers to the measure of how much risk the investment will add to
the portfolio. If a stock is riskier than a market, it will have a large beta with a value of more
than one. On the other hand, if the stock is less risky than the market, it will have a small beta
with a value of less than one. Moreover, the formula of the market model is given to calculate
the expected return of an asset as a given risk.
ER i=R f + β i ( ER m−R f )
ER i = expected return of the investment
R f = risk-free rate
β i = beta of the investment
ERm −R f = market risk premium
A stock’s beta is multiplied by the market risk premium, which is the return expected
from the market above the risk-free rate. The risk-free rate is then added to the stock’s beta
and the market risk premium. The final result will show the required return or discount rate
that provides investors with insight into the value of the asset.
The principle advantage of CAPM is the nature of the estimated cost of equity that
can be generated. This model provides more useful results than any other return models like
DDM and WACC under many situations. CAPM tends to provide more realistic information
and results to investors or businesses with better decision making. While the Weighted
Average Cost of Capital (WACC) is associated with CAPM, it represents its blended costs of
capital across all sources including common shares, preferred shares, and debts. The purpose
of WACC is to determine the capital structure of each part of a company based on the
proportion of equity, debt, and preferred stocks they have. WACC also serves as the discount
rate for calculating the net present value of a business. It is used to evaluate investment
opportunities as well. WACC is important for companies to make their investment decisions
and to evaluate projects with similar and dissimilar risks.
Literature Review
1. The risk and return form factors

Research conducted by Louis K.C., Karceski, & Lakonishok (1998) identified factors
which have best captured systematic return covariation is central to applications of
multifactor pricing models. A common data was used to evaluate the performance of
various proposed factors in capturing return comovements. The paper evaluates the
performance of fundamental factors, technical factors, macroeconomic factors, and
statistical factors in capturing the systematic covariation in stock returns. Results
showed that the fundamental factors seem to work well in capturing the covariation in
stock returns. The mean return with macroeconomic factors is quite low which they
are of limited use in structuring efficient portfolios. Some evidence also suggests that
the differences in returns persist even after accounting for the effects of industry
composition and exposures to numerous other influences. Besides, throughout this
research, it has proven clear evidence of seasonal patterns of return were in the returns
on the fundamental factors and technical factors. Investment styles stick heavily in
favour of the fundamental factors, such as value strategies.
2. The factors affecting on IPO return in the Thai Stock Market

A research conducted by Chiraphadhanakul & D Gunawardana in the year of 2005
examined the impact of initial IPO returns with different company-specific factors
and overall market factors in the Stock Exchange of Thailand starting from 2000 to
2004. Their study came into a conclusion that main specify company factors (Age,
Firm, size, ROA, Debt ratio, Return on average of 3 years return, PE Ratio, Three
years PE ratio) and other overall market factors (Trend of the SET index and trend on
SET’s volume) would influence the initial return of IPO in Thailand. Some company-
specific factors were not significant which are Age, ROA and PE ratio. Also, the
Trend of the SET index and trend on SET’s volume were highly influencers in
deciding the initial return of IPO. This study also further reveals the relationship to
the initial return of the IPO of each sector is different where it depends on the
characteristics of each sector which needed further study. The result can only find
more types of relationships, where it cannot find the relationship in some sectors.
3. Components of Market Risk and Return

An article from M. Maheu & H. McCurdy (2007) proposes a flexible but
parsimonious specification of the joint dynamics of market risk and return to produce
forecasts of a time-varying market equity premium. This article evaluates the market
risk-return relationship for U.S. equity over the period 1840-2006 using a time-
varying market premium for equity risk. Their result came into the conclusion that the
relationship between risk and return for the market equity premium is positive. The
higher the expected market risk, the higher the market equity premium. This
relationship is strongest for a two-component specification of volatility with the long-
run smooth component being priced in the conditional mean.
4. The CAPM and Fama-French Models in Brazil

This research by Chague & L. S. Bueno, (2007) is about comparing the CAPM model
and the 3 factors Fama French Model using both Brazilian and US stock market data
from the year 1999 to 2007. US data will be only used for comparison purposes. Two
competing econometric methods are being used, the Generalized Method of Moments
(GMM) by Hansen (1982) and the Iterative Nonlinear Seemingly Unrelated
Regression Estimation (ITNLSUR). From the result shown, additional factors from
Fama French enhance the power of explanatory variables than the CAPM model.
However, the success of the multifactorial model over the CAPM in the US data is not
matched in the Brazilian data. Despite finding evidence of a value-premium anomaly,
the size anomaly is not as sharp as in the US data.
5. Oil Price Volatility and Macroeconomic Factors Influence Stock Market Return:
A Study In Malaysia
Based on the research by Rabia and Khakan (2015), their study is to analyze the
impact of crude oil prices and macroeconomic variables on the stock market of
Malaysia. Data was applied from the year 1981 to 2011, with the application of
Johnson Co. integration, Enterprise Content Management and unit root test. The result
showed a significant association between crude oil prices, macroeconomic variables
on the stock market of Malaysia. Based on the empirical results, it showed that Gross
Domestic Product is significantly affected by the EXP < ROP (Growth rate of oil
price indexed by GDP)and RSP (growth rate of stock price indexed by GDP). It is
discovered that RSP is larger than other variables and it has a crucial role in economic
development. On the other hand, other variables like RSP and ROP are concerned by
the interest rate and exchange rate, which proves that the central bank of Malaysia is
managed steadily by the nature of interest rate.
6. CAPM and APT Model Development, Evaluation and Interpretation on ABC’s

Share Price
This study is to discover the comparison between the CAPM model, APT model and
redesigned APT model. The study is focusing on testing the CAPM model and APT
model with a sample of monthly data from 2006 to 2012. From the result shown, there
is a slight difference between them. It Is assumed that the APT model holds two basic
assumptions which are efficient market information and diversified investment. When
portfolios are diversified which means that market risk exposure includes most of the
micro-macro economics factors’ effects. Besides, from the study, we can see that by
using APT and extension of APT the explanatory of both models are stronger than the
CAPM model. However, there is no such difference in forecasting the rate of return
using CAPM or APT. as APT is the extended version of CAPM but APT gives better
and specific prediction for a return rate. Although it is better than CAPM it does not
error-free to expect the return in any conditions. Therefore, FF3 model has developed
a further supportive model which missing information can be further enhanced
through development and modification of Arbitrage Pricing Model (Ali, 2013).
7. The Relationship between Real Earnings Management and Firm Performance:

The Case of Energy Firms in Vietnam
Research conducted by Nguyen Vinh Khuong, , Nguyen Tran Thai Ha and Phung
Anh Thu (2018) on the influence of earnings management on the market performance
of energy listed firms in Vietnam shows that real time earnings management has a
positive impact on the performance of the firms. The research used data from 29
Vietnamese energy firms and their stock markets performance from 2010 to 2016. A
regression analysis was drawn with respect to the panel data which showed results of
a positive impact measure by ROA and ROE ratio. The results concluded that
managers of a firm that focuses on earnings management would create a profitable
picture of the firm’s financial situation, thus increasing business performance. This
allows investors to figure out the profitability of the company, thus increasing the
demand for the firm's stock, which in turn leads to the increase in price of the stock.
Malayan Petronas Gas UMW Holdings Microsoft Johnson &
Airasia Berhad
Banking Berhad Berhad Berhad Corporation Johnson
Raa=0.0133610+ 2.72205
Rmbb=0.00111191+
R klci 1.03062
R pgas =−0.00301281+0.78725
Rklci Rumws =−0.00921864+1.42484
Rklci Rmsft =0.0124715+1.22849
R klci R jnj=0.000594336+0.713371
Rus 500 Rus 500
Regression r 2=0.245432 r 2=0.478814 r 2=0.276786 r 2=0.161169 r 2=0.464754 r 2=0.364066

Function
The rate of return The rate of return The rate of return The rate of return The rate of return The rate of return
on market on market on market on market on market on market
Individual portfolio portfolio portfolio portfolio portfolio portfolio
Significance significantly significantly significantly significantly significantly significantly
affects the rate of affects the rate of affects the rate of affects the rate of affects the rate of affects the rate of
return on stock. return on stock. return on stock. return on stock. return on stock. return on stock.
There is a There is a There is a There is a There is a There is a
statistically statistically statistically statistically statistically statistically
significant linear significant linear significant linear significant linear significant linear significant linear
association association association association association association
Overall between the rate between the rate between the rate between the rate between the rate between the rate
Significance of return on of return on of return on of return on of return on of return on
market portfolio market portfolio market portfolio market portfolio market portfolio market portfolio
and the rate of and the rate of and the rate of and the rate of and the rate of and the rate of
return on stock. return on stock. return on stock. return on stock. return on stock. return on stock.
The model poorly The model poorly The model poorly The model poorly The model poorly The model poorly
Overall Fit fits the data due fits the data due fits the data due fits the data due fits the data due fits the data due to
to low r 2. to low r 2. to low r 2. to low r 2. to low r 2. low r 2.
No No No No No No
Heteroscedasticity
heteroscedasticity heteroscedasticity heteroscedasticity heteroscedasticity heteroscedasticity heteroscedasticity
No No No No Weak negative No
Autocorrelation
autocorrelation autocorrelation autocorrelation autocorrelation autocorrelation autocorrelation
Findings
The results generated by separately regressing the rate of return on market
portfolio ( Rmt ) on the rate of return on all the six companies’ stocks ( Rit ) chosen
shows a positive relationship between the former and the latter. This can be told
through the positive coefficient of the sole independent variable in the model. The
tests on the individual significance and overall significance show that Rmt does
significantly affect Rit ; however, it is noticeable that all of the results have a low
coefficient of determination (r 2 ), with 0.478814 being the highest among the six r 2.
The low r 2 of all the six companies is an indication that only a small portion of
fluctuations in Rit can be explained by the model, meaning that this model does not
suit the data well. This implies that there are more relevant independent variables that
can be added into this model so that changes in Rit could be better explained. Besides,
the tests on heteroscedasticity of all the six companies’ stock show that there is no
presence of heteroscedasticity in the data. Out of all the six companies, only
Microsoft Corporation’s stocks data show weak negative autocorrelation. We can
infer from the results of regression and tests that under normal circumstances, Rit of
any companies is positively and significantly impacted by Rmt with a low r 2 (most
likely below 0.50) being expected when the model in this case is used.
Heteroscedasticity is unlikely to present, but there are chances that autocorrelation is
present.
Conclusion
The research to find out the relationship between the rate of return of the
market portfolio and the rate of return of the 6 companies stock shows that there is a
positive outcome to the stock returns when taking market portfolio into account. Thus,
it significantly proves that changes in market portfolio does affect the rate of return of
stocks. However, a conduction of a significance test shows that the while the market
model is an explanatory variable that positively affects stock returns, it also shows
that it does not significantly cause changes in stock returns. This proves that while
market model is an effective model, it still does not take into account other factors
that would significantly affect the stock returns. Although stock market returns
provide a great way for you to see how much volatility and what return rates you can
expect over time when investing in the stock market, a proper research and analysis of
historical stock market values would enable investors to find the potentially profitable
stock.
A more thorough analysis of the stock price may provide a better result to
evaluate the stock returns. To better evaluate the stock returns flow, one of the
models that can be used is the Fama-French Three factors model as it is an extension
of CAPM which means that it is a better developed model of CAPM. three factors
from this model that describe the stock returns are market risk, the outperformance of
small-cap companies relative to large-cap companies and the outperformance of high
book-to-market value companies versus low book-to-market value companies. This
model is having high value and small companies tend to regularly outperform the
overall market. The formula of FF3 model is adding the addition variables of SMB
and HML in the CAPM model to find the expected rate of return. SMB is the historic
excess returns of small-cap companies over large-cap companies. HML is the historic
excess returns of value stocks (high book-to-price ratio) over growth stocks (low
book-to-price ratio). By adding the variables of SMB actually modified stock returns
in a more detailed version. As not most of the public traded companies are in large
cap companies while most of the companies are in small or medium cap companies.
Therefore, by just relying large companies to summarize the overall stock market
returns, unable to represent and forecast a high accuracy expected rate of return (CFI,
n.d.).
Appendix
AirAsia Berhad
Date Price R_aa R_klci R_klci2
Jan-15 1.664 2.97% 1.14% 0.01299600%
Feb-15 1.557 -6.43% 2.24% 0.05017600%
Mar-15 1.414 -9.18% 0.53% 0.00280900%
Apr-15 1.349 -4.60% -0.68% 0.00462400%
May-15 1.301 -3.56% -3.89% 0.15132100%
Jun-15 0.915 -29.67% -2.34% 0.05475600%
Jul-15 0.808 -11.69% 0.97% 0.00940900%
Aug-15 0.517 -36.01% -6.41% 0.41088100%
Sep-15 0.761 47.20% 0.51% 0.00260100%
Oct-15 0.879 15.51% 2.76% 0.07617600%
Nov-15 0.808 -8.08% 0.39% 0.00152100%
Dec-15 0.766 -5.20% 1.22% 0.01488400%
Jan-16 0.844 10.18% -1.46% 0.02131600%
Feb-16 0.873 3.44% -0.78% 0.00608400%
Mar-16 1.087 24.51% 3.80% 0.14440000%
Apr-16 1.129 3.86% -2.61% 0.06812100%
May-16 1.367 21.08% -2.79% 0.07784100%
Jun-16 1.545 13.02% 1.73% 0.02992900%
Jul-16 1.741 12.69% -0.05% 0.00002500%

Aug-16 1.783 2.41% 1.50% 0.02250000%
Sep-16 1.658 -7.01% -1.52% 0.02310400%
Oct-16 1.646 -0.72% 1.20% 0.01440000%
Nov-16 1.64 -0.36% -3.19% 0.10176100%
Dec-16 1.361 -17.01% 1.40% 0.01960000%
Jan-17 1.515 11.32% 1.82% 0.03312400%
Feb-17 1.604 5.87% 1.33% 0.01768900%
Mar-17 1.866 16.33% 2.73% 0.07452900%
Apr-17 1.991 6.70% 1.61% 0.02592100%
May-17 1.771 -11.05% -0.12% 0.00014400%
Jun-17 1.931 9.03% -0.12% 0.00014400%
Jul-17 1.919 -0.62% -0.21% 0.00044100%
Aug-17 1.973 2.81% 0.75% 0.00562500%
Sep-17 2.05 3.90% -0.99% 0.00980100%
Oct-17 1.985 -3.17% -0.44% 0.00193600%
Nov-17 1.866 -5.99% -1.72% 0.02958400%
Dec-17 1.991 6.70% 4.60% 0.21160000%
Jan-18 2.46 23.56% 3.99% 0.15920100%
Feb-18 2.603 5.81% -0.66% 0.00435600%
Mar-18 2.335 -10.30% 0.39% 0.00152100%
Apr-18 2.288 -2.01% 0.37% 0.00136900%

May-18 1.824 -20.28% -6.94% 0.48163600%
Jun-18 1.777 -2.58% -2.82% 0.07952400%
Jul-18 2.115 19.02% 5.48% 0.30030400%
Aug-18 2.044 -3.36% 1.98% 0.03920400%
Sep-18 1.878 -8.12% -1.46% 0.02131600%
Oct-18 1.563 -16.77% -4.68% 0.21902400%
Nov-18 1.83 17.08% -1.72% 0.02958400%
Dec-18 2.032 11.04% 0.64% 0.00409600%
Jan-19 2.08 2.36% -0.42% 0.00176400%
Feb-19 1.895 -8.89% 1.44% 0.02073600%
Mar-19 1.82 -3.96% -3.75% 0.14062500%
Apr-19 1.868 2.64% -0.08% 0.00006400%
May-19 1.977 5.84% 0.52% 0.00270400%
Jun-19 1.868 -5.51% 1.29% 0.01664100%
Jul-19 1.96 4.93% -2.23% 0.04972900%
Aug-19 1.79 -8.67% -1.39% 0.01932100%
Sep-19 1.76 -1.68% -1.75% 0.03062500%
Oct-19 1.91 8.52% 0.89% 0.00792100%
Nov-19 1.69 -11.52% -2.27% 0.05152900%
Dec-19 1.7 0.59% 1.73% 0.02992900%

Airasia Berhad Scattergram
Airasia Berhad Regression Result

Airasia Berhad’s Residual Plot
The residuals are plotted against the fitted values to check whether or not the regression result
is reliable. Below is the graph plotted using Gretl:
The residuals are randomly scattered around 0 for the entire range of fitted values, indicating
that the model’s predictions are correct on average rather than are systematically too high or
low. In this case, the model is not biased, and the regression result is reliable.
Airasia Berhad Regression Function

Raa=0.0133610+ 2.72205 R klci
se=( 0.0150159 ) (0.626707)
t=( 0.8898 ) (4.343)
r 2=0.245432
Test for individual significance of Rklci at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
t=4.343
Critical t value=2.0017
Since |t | is larger than the critical t value, we reject the null hypothesis. The rate of return on
market portfolio in Malaysia does significantly affect the rate of return on Airasia Berhad’s
stock.
Test for overall significance of Rklci at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
0.245432 58
F 1,58= ×
1−0.245342 1
¿ 18.8652
Critical F value=4.01
Since F 1,58 is larger than the critical F value, we reject the null hypothesis. There is a
statistically significant linear association between the rate of return on market portfolio in
Malaysia and the rate of return on Airasia Berhad’s stock.
Test for overall fit

The r 2=0.245432 implies that 24.5432% of fluctuations in the rate of return on Airasia
Berhad’s stock can be explained by this model. Although the F test shows that Rklci
significantly impacts Raa , which is an indication that knowing the value of Rklci provides
information about the value of Raa , the model does not fit the data well because the variability
about the predicted values of Raa is large.
Test for heteroscedasticity at 95% Confidence Level

ε^ 2aa=α 1+ α 2 R klci +α 3 R2klci + v t
H 0 :α 2 =α 3 =0
H a : At least one of them≠ 0
Below is the result of the auxiliary regression carried out in Gretl.
The R2 from the auxiliary regression is 0.0038.

Lagrange Multiplier ( LM )=n × R 2
¿ 60 ×0.0038
¿ 0.228
X 22 =5.99
Since LM is smaller than the X 22 , we fail to reject the null hypothesis. There is no
heteroscedasticity in the model.
Test for autocorrelation at 95% confidence level

H 0 :Thereis no autocorrelation
H a :Thereis autocorrelation
d=1.923129
d L=1.5485
d U =1.6162
4−d U =2.3838
As d U <d < 4−d U , we fail to reject the null hypothesis. There is no autocorrelation in the
model.
Malayan Banking Berhad
Date Price R_mbb R_klci R_klci2
Jan-15 8.72 -4.91% 1.14% 0.01299600%
Feb-15 9.2 5.50% 2.24% 0.05017600%
Mar-15 9.33 1.41% 0.53% 0.00280900%
Apr-15 9.21 -1.29% -0.68% 0.00462400%
May-15 9.03 -1.95% -3.89% 0.15132100%
Jun-15 9.14 1.22% -2.34% 0.05475600%
Jul-15 9.2 0.66% 0.97% 0.00940900%
Aug-15 8.76 -4.78% -6.41% 0.41088100%
Sep-15 8.56 -2.28% 0.51% 0.00260100%
Oct-15 8.26 -3.50% 2.76% 0.07617600%
Nov-15 8.32 0.73% 0.39% 0.00152100%
Dec-15 8.4 0.96% 1.22% 0.01488400%
Jan-16 8.58 2.14% -1.46% 0.02131600%
Feb-16 8.51 -0.82% -0.78% 0.00608400%
Mar-16 9.02 5.99% 3.80% 0.14440000%

Apr-16 8.93 -1.00% -2.61% 0.06812100%
May-16 8.16 -8.62% -2.79% 0.07784100%
Jun-16 8.14 -0.25% 1.73% 0.02992900%
Jul-16 8.02 -1.47% -0.05% 0.00002500%
Aug-16 7.82 -2.49% 1.50% 0.02250000%
Sep-16 7.5 -4.09% -1.52% 0.02310400%
Oct-16 7.9 5.33% 1.20% 0.01440000%
Nov-16 7.77 -1.65% -3.19% 0.10176100%
Dec-16 8.2 5.53% 1.40% 0.01960000%
Jan-17 8.22 0.24% 1.82% 0.03312400%
Feb-17 8.6 4.62% 1.33% 0.01768900%
Mar-17 8.92 3.72% 2.73% 0.07452900%
Apr-17 9.58 7.40% 1.61% 0.02592100%
May-17 9.44 -1.46% -0.12% 0.00014400%
Jun-17 9.63 2.01% -0.12% 0.00014400%
Jul-17 9.54 -0.93% -0.21% 0.00044100%
Aug-17 9.46 -0.84% 0.75% 0.00562500%
Sep-17 9.53 0.74% -0.99% 0.00980100%
Oct-17 9.25 -2.94% -0.44% 0.00193600%
Nov-17 9.25 0.00% -1.72% 0.02958400%

Dec-17 9.8 5.95% 4.60% 0.21160000%
Jan-18 10.1 3.06% 3.99% 0.15920100%
Feb-18 10.46 3.56% -0.66% 0.00435600%
Mar-18 10.6 1.34% 0.39% 0.00152100%
Apr-18 10.78 1.70% 0.37% 0.00136900%
May-18 9.66 -10.39% -6.94% 0.48163600%
Jun-18 9 -6.83% -2.82% 0.07952400%
Jul-18 9.81 9.00% 5.48% 0.30030400%
Aug-18 9.96 1.53% 1.98% 0.03920400%
Sep-18 9.79 -1.71% -1.46% 0.02131600%
Oct-18 9.49 -3.06% -4.68% 0.21902400%
Nov-18 9.39 -1.05% -1.72% 0.02958400%
Dec-18 9.5 1.17% 0.64% 0.00409600%
Jan-19 9.54 0.42% -0.42% 0.00176400%
Feb-19 9.53 -0.10% 1.44% 0.02073600%
Mar-19 9.27 -2.73% -3.75% 0.14062500%
Apr-19 9.25 -0.22% -0.08% 0.00006400%
May-19 9.02 -2.49% 0.52% 0.00270400%
Jun-19 8.88 -1.55% 1.29% 0.01664100%
Jul-19 8.65 -2.59% -2.23% 0.04972900%
Aug-19 8.69 0.46% -1.39% 0.01932100%

Sep-19 8.51 -2.07% -1.75% 0.03062500%
Oct-19 8.6 1.06% 0.89% 0.00792100%
Nov-19 8.53 -0.81% -2.27% 0.05152900%
Dec-19 8.64 1.29% 1.73% 0.02992900%
Malayan Banking Berhad Scattergram

Malayan Banking Berhad Regression Result
Malayan Banking Berhad’s Residual Plot

Malayan Banking Berhad Regression Function

Rmbb=0.00111191+ 1.03062 Rklci
se=( 0.00338286 ) (0.141188)
t=( 0.3287 )(7.300)
r 2=0.478814
H 0 :B 2=0
H a :B 2 ≠ 0
t=7.300
market portfolio in Malaysia does significantly affect the rate of return on Malayan Banking
Berhad’s stock.

H 0 :B 2=0
H a :B 2 ≠ 0
0.478814 58
F 1,58= ×
1−0.478814 1
¿ 53.284
Malaysia and the rate of return on Malayan Banking Berhad’s stock.

The r 2=0.478814 implies that 47.8814% of fluctuations in the rate of return on Malayan
Banking Berhad’s stock can be explained by this model. Although the F test shows that Rklci
significantly impacts Rmbb , which is an indication that knowing the value of Rklci provides
information about the value of Rmbb , the model does not fit the data well because the
variability about the predicted values of Rmbb is large.

ε^ 2mbb =α 1+ α 2 R klci +α 3 R2klci + v t
H 0 :α 2 =α 3 =0

¿ 60 ×0.012523
¿ 0.75138
X 22 =5.99

d=1.911964
d L=1.5485
d U =1.6162
4−d U =2.3838
model.
Petronas Gas Berhad

Date Price R_pgas R_klci R_klci2
Jan-15 22.2 0.18% 1.14% 0.01299600%
Feb-15 23.06 3.87% 2.24% 0.05017600%
Mar-15 23.02 -0.17% 0.53% 0.00280900%
Apr-15 22.72 -1.30% -0.68% 0.00462400%
May-15 21.9 -3.61% -3.89% 0.15132100%
Jun-15 21.26 -2.92% -2.34% 0.05475600%
Jul-15 22.08 3.86% 0.97% 0.00940900%
Aug-15 21.32 -3.44% -6.41% 0.41088100%
Sep-15 21.96 3.00% 0.51% 0.00260100%
Oct-15 22.98 4.64% 2.76% 0.07617600%
Nov-15 22.92 -0.26% 0.39% 0.00152100%
Dec-15 22.7 -0.96% 1.22% 0.01488400%
Jan-16 22.88 0.79% -1.46% 0.02131600%
Feb-16 22.04 -3.67% -0.78% 0.00608400%
Mar-16 22 -0.18% 3.80% 0.14440000%
Apr-16 21.98 -0.09% -2.61% 0.06812100%
May-16 21.64 -1.55% -2.79% 0.07784100%
Jun-16 22 1.66% 1.73% 0.02992900%
Jul-16 22.18 0.82% -0.05% 0.00002500%
Aug-16 22.2 0.09% 1.50% 0.02250000%
Sep-16 21.84 -1.62% -1.52% 0.02310400%

Oct-16 22 0.73% 1.20% 0.01440000%
Nov-16 20.98 -4.64% -3.19% 0.10176100%
Dec-16 21.3 1.53% 1.40% 0.01960000%
Jan-17 20.88 -1.97% 1.82% 0.03312400%
Feb-17 20.02 -4.12% 1.33% 0.01768900%
Mar-17 19.76 -1.30% 2.73% 0.07452900%
Apr-17 18.48 -6.48% 1.61% 0.02592100%
May-17 18.56 0.43% -0.12% 0.00014400%
Jun-17 18.54 -0.11% -0.12% 0.00014400%
Jul-17 18.74 1.08% -0.21% 0.00044100%
Aug-17 18.4 -1.81% 0.75% 0.00562500%
Sep-17 17.9 -2.72% -0.99% 0.00980100%
Oct-17 18.04 0.78% -0.44% 0.00193600%
Nov-17 15.88 -11.97% -1.72% 0.02958400%
Dec-17 17.48 10.08% 4.60% 0.21160000%
Jan-18 17.9 2.40% 3.99% 0.15920100%
Feb-18 17.62 -1.56% -0.66% 0.00435600%
Mar-18 17.84 1.25% 0.39% 0.00152100%
Apr-18 17.82 -0.11% 0.37% 0.00136900%
May-18 17.58 -1.35% -6.94% 0.48163600%
Jun-18 17.3 -1.59% -2.82% 0.07952400%

Jul-18 18.74 8.32% 5.48% 0.30030400%
Aug-18 18.7 -0.21% 1.98% 0.03920400%
Sep-18 18.9 1.07% -1.46% 0.02131600%
Oct-18 18.28 -3.28% -4.68% 0.21902400%
Nov-18 18.94 3.61% -1.72% 0.02958400%
Dec-18 19.2 1.37% 0.64% 0.00409600%
Jan-19 18.08 -5.83% -0.42% 0.00176400%
Feb-19 18.08 0.00% 1.44% 0.02073600%
Mar-19 17.62 -2.54% -3.75% 0.14062500%
Apr-19 17.68 0.34% -0.08% 0.00006400%
May-19 17.66 -0.11% 0.52% 0.00270400%
Jun-19 17.36 -1.70% 1.29% 0.01664100%
Jul-19 16.08 -7.37% -2.23% 0.04972900%
Aug-19 16.08 0.00% -1.39% 0.01932100%
Sep-19 16.38 1.87% -1.75% 0.03062500%
Oct-19 16.64 1.59% 0.89% 0.00792100%
Nov-19 15.5 -6.85% -2.27% 0.05152900%
Dec-19 16.62 7.23% 1.73% 0.02992900%

Petronas Gas Berhad Scattergram
Petronas Gas Berhad Regression Result

Petronas Gas Berhad’s Residual Plot
Petronas Gas Berhad Regression Function

R pgas =−0.00301281+0.78725 Rklci
se=( 0.00400357 ) (0.167094)
t=(−0.7525 )(4.711)
r 2=0.276786
H 0 :B 2=0
H a :B 2 ≠ 0
t=4.711
market portfolio in Malaysia does significantly affect the rate of return on Petronas Gas
Berhad’s stock.

H 0 :B 2=0
H a :B 2 ≠ 0
0.276786 58
F 1,58= ×
1−0.276786 1
¿ 22.19754
Malaysia and the rate of return on Petronas Gas Berhad’s stock.

The r 2=0.276786 implies that 27.6786% of fluctuations in the rate of return on Petronas Gas
Berhad’s stock can be explained by this model. Although the F test shows that Rklci
significantly impacts R pgas, which is an indication that knowing the value of Rklci provides
information about the value of R pgas, the model does not fit the data well because the
variability about the predicted values of R pgas is large.
ε^ 2pgas=α 1 +α 2 Rklci + α 3 R 2klci +v t
H 0 :α 2 =α 3 =0

¿ 60 ×0.016247
¿ 0.97482
X 22 =5.99

d=2.104829
d L=1.5485
d U =1.6162
4−d U =2.3838
model.
UWM Holdings Berhad
Date Price R_umws R_klci R_klci2 e_t e_t-1
Jan-15 10.9 -0.55% 1.14% 0.01299600% -0.01252000 0
Feb-15 11.08 1.65% 2.24% 0.05017600% -0.00619800 -0.01252000
Mar-15 10.84 -2.17% 0.53% 0.00280900% -0.02003000 -0.00619800
Apr-15 10.64 -1.85% -0.68% 0.00462400% 0.00040760 -0.02003000
May-
10.72 0.75% -3.89% 0.15132100% 0.07215000 0.00040760
15
Jun-15 10.14 -5.41% -2.34% 0.05475600% -0.01154000 0.07215000
Jul-15 10 -1.38% 0.97% 0.00940900% -0.01840000 -0.01154000
Aug-15 8.5 -15.00% -6.41% 0.41088100% -0.04945000 -0.01840000
Sep-15 7.52 -11.53% 0.51% 0.00260100% -0.11334810 -0.04945000
Oct-15 8.22 9.31% 2.76% 0.07617600% 0.06299000 -0.11334810
Nov-15 7.98 -2.92% 0.39% 0.00152100% -0.02554000 0.06299000
Dec-15 7.87 -1.38% 1.22% 0.01488400% -0.02196000 -0.02554000
Jan-16 7.01 -10.93% -1.46% 0.02131600% -0.07928000 -0.02196000
Feb-16 7.08 1.00% -0.78% 0.00608400% 0.03033000 -0.07928000
Mar-16 6.87 -2.97% 3.80% 0.14440000% -0.07463000 0.03033000
Apr-16 6.56 -4.51% -2.61% 0.06812100% 0.00130700 -0.07463000

May-
4.98 -24.09% -2.79% 0.07784100% -0.19192820 0.00130700
16
Jun-16 5.73 15.06% 1.73% 0.02992900% 0.13516880 -0.19192820
Jul-16 5.7 -0.52% -0.05% 0.00002500% 0.00473100 0.13516880
Aug-16 5.57 -2.28% 1.50% 0.02250000% -0.03495000 0.00473100
Sep-16 5.83 4.67% -1.52% 0.02310400% 0.07758000 -0.03495000
Oct-16 5.96 2.23% 1.20% 0.01440000% 0.01442000 0.07758000
Nov-16 5.14 -13.76% -3.19% 0.10176100% -0.08293000 0.01442000
Dec-16 4.57 -11.09% 1.40% 0.01960000% -0.12162920 -0.08293000
Jan-17 5.65 23.63% 1.82% 0.03312400% 0.21958650 -0.12162920
Feb-17 5.54 -1.95% 1.33% 0.01768900% -0.02923000 0.21958650
Mar-17 6 8.30% 2.73% 0.07452900% 0.05332000 -0.02923000
Apr-17 5.73 -4.50% 1.61% 0.02592100% -0.05872000 0.05332000
May-
5.54 -3.32% -0.12% 0.00014400% -0.02227000 -0.05872000
17
June-
5.52 -0.36% -0.12% 0.00014400% 0.00732800 -0.02227000
17
Jul-17 5.83 5.62% -0.21% 0.00044100% 0.06841000 0.00732800
Aug-17 6.08 4.29% 0.75% 0.00562500% 0.04143000 0.06841000
Sep-17 5.55 -8.72% -0.99% 0.00980100% -0.06388000 0.04143000
Oct-17 5.24 -5.59% -0.44% 0.00193600% -0.04041000 -0.06388000
Nov-17 5.27 0.57% -1.72% 0.02958400% 0.03943000 -0.04041000

Dec-17 5.2 -1.33% 4.60% 0.21160000% -0.06962000 0.03943000
Jan-18 6.82 31.15% 3.99% 0.15920100% 0.26386730 -0.06962000
Feb-18 6.5 -4.69% -0.66% 0.00435600% -0.02828000 0.26386730
Mar-18 6.13 -5.69% 0.39% 0.00152100% -0.05324000 -0.02828000
Apr-18 6.11 -0.33% 0.37% 0.00136900% 0.00064670 -0.05324000
May-
6.4 4.75% -6.94% 0.48163600% 0.15560290 0.00064670
18
Jun-18 5.97 -6.72% -2.82% 0.07952400% -0.01780000 0.15560290
Jul-18 6 0.50% 5.48% 0.30030400% -0.06386000 -0.01780000
Aug-18 5.94 -1.00% 1.98% 0.03920400% -0.02899000 -0.06386000
Sep-18 5.02 -15.49% -1.46% 0.02131600% -0.12487860 -0.02899000
Oct-18 4.75 -5.38% -4.68% 0.21902400% 0.02210000 -0.12487860
Nov-18 5.05 6.32% -1.72% 0.02958400% 0.09693000 0.02210000
Dec-18 5.47 8.32% 0.64% 0.00409600% 0.08330000 0.09693000
Jan-19 5.84 6.76% -0.42% 0.00176400% 0.08280000 0.08330000
Feb-19 5.8 -0.68% 1.44% 0.02073600% -0.01810000 0.08280000
Mar-19 5.73 -1.21% -3.75% 0.14062500% 0.05055000 -0.01810000
Apr-19 5.45 -4.89% -0.08% 0.00006400% -0.03854000 0.05055000
May-
5.09 -6.61% 0.52% 0.00270400% -0.06429000 -0.03854000
19
Jun-19 5.4 6.09% 1.29% 0.01664100% 0.05174000 -0.06429000
Jul-19 5.06 -6.30% -2.23% 0.04972900% -0.02201000 0.05174000

Aug-19 5.01 -0.99% -1.39% 0.01932100% 0.01912000 -0.02201000
Sep-19 4.84 -3.39% -1.75% 0.03062500% 0.00025340 0.01912000
Oct-19 4.39 -9.30% 0.89% 0.00792100% -0.09646000 0.00025340
Nov-19 4.33 -1.37% -2.27% 0.05152900% 0.02786000 -0.09646000
Dec-19 4.49 3.70% 1.73% 0.02992900% 0.02157000 0.02786000
UMW Holdings Berhad Scattergram

UWM Holdings Berhad Regression Result
UMW Holdings Berhad’s Residual Plot

UMW Holdings Berhad Regression Function

Rumws =−0.00921864+1.42484 R klci
se=( 0.0102267 ) (0.426825)
t=(−0.9014 ) (3.338)
r 2=0.161169

H 0 :B 2=0
H a :B 2 ≠ 0
t=3.338
market portfolio in Malaysia does significantly affect the rate of return on UMW Holdings
Berhad’s stock.

H 0 :B 2=0
H a :B 2 ≠ 0
0.161169 58
F 1,58= ×
1−0.161169 1
¿ 11.14386
Malaysia and the rate of return on UMW Holdings Berhad’s stock.

The r 2=0.161169 implies that 16.1169% of fluctuations in the rate of return on UMW
Holdings Berhad’s stock can be explained by this model. Although the F test shows that Rklci
significantly impacts Rumws, which is an indication that knowing the value of Rklci provides
information about the value of Rumws, the model does not fit the data well because the
variability about the predicted values of Rumws is large.

ε^ 2umws=α 1+ α 2 R klci +α 3 R2klci+ v t
H 0 :α 2 =α 3 =0

¿ 60 ×0.086514
¿ 5.19084
X 22 =5.99

d=2.418501
d L=1.5485
d U =1.6162
4−d U =2.3838
4−d L =2.4515
As 4−d U < d <4−d L, we cannot conclude whether or not autocorrelation exists by using the
Durbin-Watson d Test.
We will proceed to use Breusch-Godfrey Test to test the existence of first-order
autocorrelation in this model at 95% confidence level.
Rumws =B1 + B2 R klci + μt
e t =A 1+ A 2 R klci + ρ1 et −1+ v t
H 0 :Thereis no first−order autocorrelation
H a :Thereis first−order autocorrelation
Lagrange Multiplier ( LM )=n× R2

¿ 60 ×0.044236
¿ 2.65416
X 21 =3.84
As LM is smaller than X 21 , we fail to reject the null hypothesis. There is no first-order
autocorrelation in the model.
KLCI Index
Date Point R_klci
Jan-15 1,781.26 1.14%
Feb-15 1,821.21 2.24%
Mar-15 1,830.78 0.53%
Apr-15 1,818.27 -0.68%
May-15 1,747.52 -3.89%
Jun-15 1,706.64 -2.34%
Jul-15 1,723.14 0.97%
Aug-15 1,612.74 -6.41%
Sep-15 1,621.04 0.51%
Oct-15 1,665.71 2.76%
Nov-15 1,672.16 0.39%
Dec-15 1,692.51 1.22%
Jan-16 1,667.80 -1.46%
Feb-16 1,654.75 -0.78%
Mar-16 1,717.58 3.80%
Apr-16 1,672.72 -2.61%
May-16 1,626.00 -2.79%
Jun-16 1,654.08 1.73%
Jul-16 1,653.26 -0.05%

Aug-16 1,678.06 1.50%
Sep-16 1,652.55 -1.52%
Oct-16 1,672.46 1.20%
Nov-16 1,619.12 -3.19%
Dec-16 1,641.73 1.40%
Jan-17 1,671.54 1.82%
Feb-17 1,693.77 1.33%
Mar-17 1,740.09 2.73%
Apr-17 1,768.06 1.61%
May-17 1,765.87 -0.12%
Jun-17 1,763.67 -0.12%
Jul-17 1,760.03 -0.21%
Aug-17 1,773.16 0.75%
Sep-17 1,755.58 -0.99%
Oct-17 1,747.92 -0.44%
Nov-17 1,717.86 -1.72%
Dec-17 1,796.81 4.60%
Jan-18 1,868.58 3.99%
Feb-18 1,856.20 -0.66%
Mar-18 1,863.46 0.39%
Apr-18 1,870.37 0.37%

May-18 1,740.62 -6.94%
Jun-18 1,691.50 -2.82%
Jul-18 1,784.25 5.48%
Aug-18 1,819.66 1.98%
Sep-18 1,793.15 -1.46%
Oct-18 1,709.27 -4.68%
Nov-18 1,679.86 -1.72%
Dec-18 1,690.58 0.64%
Jan-19 1,683.53 -0.42%
Feb-19 1,707.73 1.44%
Mar-19 1,643.63 -3.75%
Apr-19 1,642.29 -0.08%
May-19 1,650.76 0.52%
Jun-19 1,672.13 1.29%
Jul-19 1,634.87 -2.23%
Aug-19 1,612.14 -1.39%
Sep-19 1,583.91 -1.75%
Oct-19 1,597.98 0.89%
Nov-19 1,561.74 -2.27%
Dec-19 1,588.76 1.73%

Microsoft Corporation
Date Price R_msft R_us500 R_us5002
Jan-15 40.4 -13.02% -3.10% 0.09610000%
Feb-15 43.85 8.54% 5.49% 0.30140100%
Mar-15 40.66 -7.27% -1.74% 0.03027600%
Apr-15 48.64 19.63% 0.85% 0.00722500%
May-15 46.86 -3.66% 1.05% 0.01102500%
Jun-15 44.15 -5.78% -2.10% 0.04410000%
Jul-15 46.7 5.78% 1.97% 0.03880900%
Aug-15 43.52 -6.81% -6.26% 0.39187600%
Sep-15 44.26 1.70% -2.64% 0.06969600%
Oct-15 52.64 18.93% 8.30% 0.68890000%
Nov-15 54.35 3.25% 0.05% 0.00002500%
Dec-15 55.48 2.08% -1.75% 0.03062500%
Jan-16 55.09 -0.70% -5.07% 0.25704900%
Feb-16 50.88 -7.64% -0.41% 0.00168100%
Mar-16 55.23 8.55% 6.60% 0.43560000%

Apr-16 49.87 -9.70% 0.27% 0.00072900%
May-16 53 6.28% 1.53% 0.02340900%
Jun-16 51.17 -3.45% 0.09% 0.00008100%
Jul-16 56.68 10.77% 3.56% 0.12673600%
Aug-16 57.46 1.38% -0.12% 0.00014400%
Sep-16 57.6 0.24% -0.12% 0.00014400%
Oct-16 59.92 4.03% -1.94% 0.03763600%
Nov-16 60.26 0.57% 3.42% 0.11696400%
Dec-16 62.14 3.12% 1.82% 0.03312400%
Jan-17 64.65 4.04% 1.79% 0.03204100%
Feb-17 63.98 -1.04% 3.72% 0.13838400%
Mar-17 65.86 2.94% -0.04% 0.00001600%
Apr-17 68.46 3.95% 0.91% 0.00828100%
May-17 69.84 2.02% 1.16% 0.01345600%
Jun-17 68.93 -1.30% 0.48% 0.00230400%
Jul-17 72.7 5.47% 1.93% 0.03724900%
Aug-17 74.77 2.85% 0.05% 0.00002500%
Sep-17 74.49 -0.37% 1.93% 0.03724900%
Oct-17 83.18 11.67% 2.22% 0.04928400%
Nov-17 84.17 1.19% 2.81% 0.07896100%
Dec-17 85.54 1.63% 0.98% 0.00960400%

Jan-18 95.01 11.07% 5.62% 0.31584400%
Feb-18 93.77 -1.31% -3.89% 0.15132100%
Mar-18 91.27 -2.67% -2.69% 0.07236100%
Apr-18 93.52 2.47% 0.27% 0.00072900%
May-18 98.84 5.69% 2.16% 0.04665600%
Jun-18 98.61 -0.23% 0.48% 0.00230400%
Jul-18 106.08 7.58% 3.60% 0.12960000%
Aug-18 112.33 5.89% 3.03% 0.09180900%
Sep-18 114.37 1.82% 0.43% 0.00184900%
Oct-18 106.81 -6.61% -6.94% 0.48163600%
Nov-18 110.89 3.82% 1.79% 0.03204100%
Dec-18 101.57 -8.40% -9.18% 0.84272400%
Jan-19 104.43 2.82% 7.87% 0.61936900%
Feb-19 112.03 7.28% 2.97% 0.08820900%
Mar-19 117.94 5.28% 1.79% 0.03204100%
Apr-19 130.6 10.73% 3.93% 0.15444900%
May-19 123.68 -5.30% -6.58% 0.43296400%
Jun-19 133.96 8.31% 6.89% 0.47472100%
Jul-19 136.27 1.72% 1.31% 0.01716100%
Aug-19 137.86 1.17% -1.81% 0.03276100%
Sep-19 139.03 0.85% 1.72% 0.02958400%

Oct-19 143.37 3.12% 2.04% 0.04161600%
Nov-19 151.38 5.59% 3.40% 0.11560000%
Dec-19 157.7 4.17% 2.86% 0.08179600%
Microsoft Corporation Scattergram
Microsoft Corporation Regression Result

Microsoft Corporation’s Residual Plot
Microsoft Corporation Regression Function

Rmsft =0.0124715+1.22849 Rus 500
se=( 0.00609556 ) (0.173110)
t=( 2.046 ) (7.097)
r 2=0.464754
Test for individual significance of Rus 500 at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
t=7.097
market portfolio in the United States does significantly affect the rate of return on Microsoft
Corporation’s stock.
Test for overall significance of Rus 500 at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
0.464754 58
F 1,58= ×
1−464754 1
¿ 50.36135
statistically significant linear association between the rate of return on market portfolio in the
United States and the rate of return on Microsoft Corporation’s stock.

The r 2=0.464754 implies that 46.4754% of fluctuations in the rate of return on Microsoft
Corporation’s stock can be explained by this model. Although the F test shows that Rus 500
significantly impacts Rmsft , which is an indication that knowing the value of Rus 500 provides
information about the value of Rmsft , the model does not fit the data well because the
variability about the predicted values of Rmsft is large.

ε^ 2msft =α 1 +α 2 R us500 +α 3 R2us 500 + v t
H 0 :α 2 =α 3 =0

¿ 60 ×0.003063
¿ 0.18378
X 22 =5.99

d=2.514387
d L=1.5485
d U =1.6162
4−d U =2.3838
4−d L =2.4515
As 4−d L < d <4 , we reject the null hypothesis. There is autocorrelation in the model.
d=2(1− ^ρ )
2.514387=2 ( 1−^ρ )
2.514387
^ρ =1−
2
¿−0.2571935
Therefore, there is a weak negative autocorrelation in this model.
Johnson & Johnson
Date Price R_jnj R_us500 R_us5002
Jan-15 100.14 -4.24% -3.10% 0.09610000%
Feb-15 102.51 2.37% 5.49% 0.30140100%

Mar-15 100.6 -1.86% -1.74% 0.03027600%
Apr-15 99.2 -1.39% 0.85% 0.00722500%
May-15 100.14 0.95% 1.05% 0.01102500%
Jun-15 97.46 -2.68% -2.10% 0.04410000%
Jul-15 100.21 2.82% 1.97% 0.03880900%
Aug-15 93.98 -6.22% -6.26% 0.39187600%
Sep-15 93.35 -0.67% -2.64% 0.06969600%
Oct-15 101.03 8.23% 8.30% 0.68890000%
Nov-15 101.24 0.21% 0.05% 0.00002500%
Dec-15 102.72 1.46% -1.75% 0.03062500%
Jan-16 104.44 1.67% -5.07% 0.25704900%
Feb-16 105.21 0.74% -0.41% 0.00168100%
Mar-16 108.2 2.84% 6.60% 0.43560000%
Apr-16 112.08 3.59% 0.27% 0.00072900%
May-16 112.69 0.54% 1.53% 0.02340900%
Jun-16 121.3 7.64% 0.09% 0.00008100%
Jul-16 125.23 3.24% 3.56% 0.12673600%
Aug-16 119.34 -4.70% -0.12% 0.00014400%
Sep-16 118.13 -1.01% -0.12% 0.00014400%
Oct-16 115.99 -1.81% -1.94% 0.03763600%
Nov-16 111.3 -4.04% 3.42% 0.11696400%

Dec-16 115.21 3.51% 1.82% 0.03312400%
Jan-17 113.25 -1.70% 1.79% 0.03204100%
Feb-17 122.21 7.91% 3.72% 0.13838400%
Mar-17 124.55 1.91% -0.04% 0.00001600%
Apr-17 123.47 -0.87% 0.91% 0.00828100%
May-17 128.25 3.87% 1.16% 0.01345600%
Jun-17 132.29 3.15% 0.48% 0.00230400%
Jul-17 132.72 0.33% 1.93% 0.03724900%
Aug-17 132.37 -0.26% 0.05% 0.00002500%
Sep-17 130.01 -1.78% 1.93% 0.03724900%
Oct-17 139.41 7.23% 2.22% 0.04928400%
Nov-17 139.33 -0.06% 2.81% 0.07896100%
Dec-17 139.72 0.28% 0.98% 0.00960400%
Jan-18 138.19 -1.10% 5.62% 0.31584400%
Feb-18 129.88 -6.01% -3.89% 0.15132100%
Mar-18 128.15 -1.33% -2.69% 0.07236100%
Apr-18 126.49 -1.30% 0.27% 0.00072900%
May-18 119.62 -5.43% 2.16% 0.04665600%
Jun-18 121.34 1.44% 0.48% 0.00230400%
Jul-18 132.52 9.21% 3.60% 0.12960000%
Aug-18 134.69 1.64% 3.03% 0.09180900%

Sep-18 138.17 2.58% 0.43% 0.00184900%
Oct-18 139.99 1.32% -6.94% 0.48163600%
Nov-18 146.9 4.94% 1.79% 0.03204100%
Dec-18 129.05 -12.15% -9.18% 0.84272400%
Jan-19 133.08 3.12% 7.87% 0.61936900%
Feb-19 136.64 2.68% 2.97% 0.08820900%
Mar-19 139.79 2.31% 1.79% 0.03204100%
Apr-19 141.2 1.01% 3.93% 0.15444900%
May-19 131.15 -7.12% -6.58% 0.43296400%
Jun-19 139.28 6.20% 6.89% 0.47472100%
Jul-19 130.22 -6.50% 1.31% 0.01716100%
Aug-19 128.36 -1.43% -1.81% 0.03276100%
Sep-19 129.38 0.79% 1.72% 0.02958400%
Oct-19 132.04 2.06% 2.04% 0.04161600%
Nov-19 137.49 4.13% 3.40% 0.11560000%
Dec-19 145.87 6.09% 2.86% 0.08179600%

Johnson & Johnson Scattergram
Johnson & Johnson Regression Result

Johnson & Johnson’s Residual Plot
Johnson & Johnson Regression Function

R jnj=0.000594336+0.713371 Rus 500
se=( 0.00435923 ) (0.123799)
t=( 0.1363 ) (5.762)
r 2=0.364066
Test for individual significance of Rus 500 at 95% confidence level
H 0 :B 2=0
H a :B 2 ≠ 0
t=5.762
market portfolio in the United States does significantly affect the rate of return on Johnson &
Johnson’s stock.
Test for overall significance of Rus 500 at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
0.364066 58
F 1,58= ×
1−0.364066 1
¿ 33.20444
statistically significant linear association between the rate of return on market portfolio in the
United States and the rate of return on Johnson & Johnson’s stock.

The r 2=0.364066 implies that 36.4066% of fluctuations in the rate of return on Johnson &
Johnson’s stock can be explained by this model. Although the F test shows that Rus 500
significantly impacts R jnj, which is an indication that knowing the value of Rus 500 provides
information about the value of R jnj, the model does not fit the data well because the
variability about the predicted values of R jnj is large.
ε^ 2jnj =α 1+ α 2 R us500 +α 3 R2us 500 + v t
H 0 :α 2 =α 3 =0

¿ 60 ×0.024914
¿ 1.49484
X 22 =5.99

d=1.932621
d L=1.5485
d U =1.6162
4−d U =2.3838
4−d L =2.4515
model.
S&P 500 Index
Date Point R_us500
Jan-15 1,994.99 -3.10%
Feb-15 2,104.50 5.49%
Mar-15 2,067.89 -1.74%
Apr-15 2,085.51 0.85%
May-15 2,107.39 1.05%
Jun-15 2,063.11 -2.10%
Jul-15 2,103.84 1.97%
Aug-15 1,972.18 -6.26%
Sep-15 1,920.03 -2.64%
Oct-15 2,079.36 8.30%
Nov-15 2,080.41 0.05%
Dec-15 2,043.94 -1.75%
Jan-16 1,940.24 -5.07%
Feb-16 1,932.23 -0.41%
Mar-16 2,059.74 6.60%
Apr-16 2,065.30 0.27%
May-16 2,096.96 1.53%
Jun-16 2,098.86 0.09%
Jul-16 2,173.60 3.56%

Aug-16 2,170.95 -0.12%
Sep-16 2,168.27 -0.12%
Oct-16 2,126.15 -1.94%
Nov-16 2,198.81 3.42%
Dec-16 2,238.83 1.82%
Jan-17 2,278.87 1.79%
Feb-17 2,363.64 3.72%
Mar-17 2,362.72 -0.04%
Apr-17 2,384.20 0.91%
May-17 2,411.80 1.16%
Jun-17 2,423.41 0.48%
Jul-17 2,470.30 1.93%
Aug-17 2,471.65 0.05%
Sep-17 2,519.36 1.93%
Oct-17 2,575.26 2.22%
Nov-17 2,647.58 2.81%
Dec-17 2,673.61 0.98%
Jan-18 2,823.81 5.62%
Feb-18 2,713.83 -3.89%
Mar-18 2,640.87 -2.69%
Apr-18 2,648.05 0.27%

May-18 2,705.27 2.16%
Jun-18 2,718.37 0.48%
Jul-18 2,816.29 3.60%
Aug-18 2,901.52 3.03%
Sep-18 2,913.98 0.43%
Oct-18 2,711.74 -6.94%
Nov-18 2,760.17 1.79%
Dec-18 2,506.85 -9.18%
Jan-19 2,704.10 7.87%
Feb-19 2,784.49 2.97%
Mar-19 2,834.40 1.79%
Apr-19 2,945.83 3.93%
May-19 2,752.06 -6.58%
Jun-19 2,941.76 6.89%
Jul-19 2,980.38 1.31%
Aug-19 2,926.46 -1.81%
Sep-19 2,976.74 1.72%
Oct-19 3,037.56 2.04%
Nov-19 3,140.98 3.40%
Dec-19 3,230.78 2.86%

References
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ngs_Management_An_Emerging_Market_Perspective
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of-weighted-average-cost-of-capital-wacc
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Name: Oui Qiao Ying (J16022001)

Wong Jia Min (J16022443)

Lim Heng Yi (J14016728)

Eshwarr Vishnodev (J17024968)

ER i = expected return of the investment

β i = beta of the investment

ERm −R f = market risk premium

1. The risk and return form factors

2. The factors affecting on IPO return in the Thai Stock Market

3. Components of Market Risk and Return

4. The CAPM and Fama-French Models in Brazil

6. CAPM and APT Model Development, Evaluation and Interpretation on ABC’s

7. The Relationship between Real Earnings Management and Firm Performance:

Regression r 2=0.245432 r 2=0.478814 r 2=0.276786 r 2=0.161169 r 2=0.464754 r 2=0.364066

Date Price R_aa R_klci R_klci2

Jan-15 1.664 2.97% 1.14% 0.01299600%

Feb-15 1.557 -6.43% 2.24% 0.05017600%

Mar-15 1.414 -9.18% 0.53% 0.00280900%

Apr-15 1.349 -4.60% -0.68% 0.00462400%

May-15 1.301 -3.56% -3.89% 0.15132100%

Jun-15 0.915 -29.67% -2.34% 0.05475600%

Jul-15 0.808 -11.69% 0.97% 0.00940900%

Aug-15 0.517 -36.01% -6.41% 0.41088100%

Sep-15 0.761 47.20% 0.51% 0.00260100%

Oct-15 0.879 15.51% 2.76% 0.07617600%

Nov-15 0.808 -8.08% 0.39% 0.00152100%

Dec-15 0.766 -5.20% 1.22% 0.01488400%

Jan-16 0.844 10.18% -1.46% 0.02131600%

Feb-16 0.873 3.44% -0.78% 0.00608400%

Mar-16 1.087 24.51% 3.80% 0.14440000%

Apr-16 1.129 3.86% -2.61% 0.06812100%

May-16 1.367 21.08% -2.79% 0.07784100%

Jun-16 1.545 13.02% 1.73% 0.02992900%

Jul-16 1.741 12.69% -0.05% 0.00002500%

Sep-16 1.658 -7.01% -1.52% 0.02310400%

Oct-16 1.646 -0.72% 1.20% 0.01440000%

Nov-16 1.64 -0.36% -3.19% 0.10176100%

Dec-16 1.361 -17.01% 1.40% 0.01960000%

Jan-17 1.515 11.32% 1.82% 0.03312400%

Feb-17 1.604 5.87% 1.33% 0.01768900%

Mar-17 1.866 16.33% 2.73% 0.07452900%

Apr-17 1.991 6.70% 1.61% 0.02592100%

May-17 1.771 -11.05% -0.12% 0.00014400%

Jun-17 1.931 9.03% -0.12% 0.00014400%

Jul-17 1.919 -0.62% -0.21% 0.00044100%

Aug-17 1.973 2.81% 0.75% 0.00562500%

Sep-17 2.05 3.90% -0.99% 0.00980100%

Oct-17 1.985 -3.17% -0.44% 0.00193600%

Nov-17 1.866 -5.99% -1.72% 0.02958400%

Dec-17 1.991 6.70% 4.60% 0.21160000%

Jan-18 2.46 23.56% 3.99% 0.15920100%

Feb-18 2.603 5.81% -0.66% 0.00435600%

Mar-18 2.335 -10.30% 0.39% 0.00152100%

Apr-18 2.288 -2.01% 0.37% 0.00136900%

Jun-18 1.777 -2.58% -2.82% 0.07952400%

Jul-18 2.115 19.02% 5.48% 0.30030400%

Aug-18 2.044 -3.36% 1.98% 0.03920400%

Sep-18 1.878 -8.12% -1.46% 0.02131600%

Oct-18 1.563 -16.77% -4.68% 0.21902400%

Nov-18 1.83 17.08% -1.72% 0.02958400%

Dec-18 2.032 11.04% 0.64% 0.00409600%

Jan-19 2.08 2.36% -0.42% 0.00176400%

Feb-19 1.895 -8.89% 1.44% 0.02073600%