Web Master: Capital Asset Pricing and Arbitrage

Pricing Theory
1.0. Slope of Characteristic Line (Beta)
In order to estimate a firms beta from the slope of characteristic line, the historical data
was taken from http://finance.yahoo.com/. Beta is known as a measure of systematic risk of a
security against the market. In our assessment, 2 years of daily data and 5 years (60months) of
monthly data from JPMorgan Chase & Co and S&P 500 were taken into account in order to form
the scatter plot for slope of characteristic line.

1.1.

2 Years of Daily Data

10.00%
8.00%

y = 1.4516x - 0.0001

6.00%
4.00%

Return on JPM

2.00%
-8.00%

-6.00%

-4.00%

0.00%
-2.00% 0.00%
-2.00%

2.00%

4.00%

6.00%

Return - JPM
Linear (Return - JPM)

-4.00%
-6.00%
-8.00%
-10.00%
-12.00%
Return on S&P 500

Figure 1.1: Scatter diagram and security characteristic line for JPMorgan Chase & Co. against the S&P
500. (January 2011 Dec 2013)

As shown in the equation in Figure 1.1, the beta regressed from the return of JPMorgan
Chase & Co. and S&P 500 is 1.4516. It is known that the beta for the market index equals to
1.0. Therefore, investors would be taking 45% (0.4516) more risk than S&P 500 (market index).

In this case, the return on stock should be 45% more than the market in order for the investor
to earn an abnormal return.

1.2.

5 Years of Monthly Data

30.00%

20.00%

y = 1.6818x - 0.0056

Return on JPM

10.00%

-15.00%

-10.00%

0.00%
-5.00%
0.00%

5.00%

10.00%

15.00%

Return - JPM
Linear (Return - JPM)

-10.00%

-20.00%

-30.00%
Return on S&P 500
Figure 1.2: Scatter diagram and security characteristic line for JPMorgan Chase & Co. against the S&P
500. (January 2009 Dec 2013)

From the slope of characteristic line shown in Figure 1.2, there is a beta of 1.6818.
This shows us, that if an investor plans to invest in a 5 year JPMorgan Chase & Co. stock, the
investor would be bearing an extra 69% (0.6818) risk compared to the market. In order for the
investor to have an abnormal return, the return on stock would have to be 69% higher than
what the market is earning.

2.0. Index-Model Regression

The index-model regression is used to measure the risk and return of a stock using the
equation of Rit = i +iRMt + eit (Bodie, Kane, & Marcus, 2013). Whereby, the dependent variable
is the stocks excess return1 (ER=rit rf) in each month explained by the independent variable
(market indexs excess return in the month). Since were using S&P 500, the risk-free rate
would be taken from the 3 months U.S. Treasury Bills which is 0.01%.
Alpha
1st Period 2nd Period
1
JPMorgan Chase & Co. (JPM)
-0.00757
-0.00514
2
Bank of New York Mellon (BK)
-0.01136
-0.00497
3
BB&T Corporation (BBT)
-0.01324
0.00146
4
Citigroup (C )
-0.03064
-0.01427
5
Comerica (CMA)
0.00583
-0.00385
6
People's United Bank (PBCT)
-0.00889
-0.00056
7
PNC Financial Services (PNC)
-0.00804
-0.00047
8
Sun Trust Bank (STI)
-0.01208
-0.00334
9
Wells Fargo & Company (WFC)
-0.02093
0.00810
10
Zions Bancorporation (ZION)
-0.01165
-0.01171
11
Fifth Third Bank (FITB)
0.00743
0.00459
12
Huntington Bancshares Inc. (HBAN)
-0.01492
0.00343
Table 2.0: Alpha (intercept) and beta (slope) of firms stock.

No.

Firms Stock

Beta
1st Period 2nd Period
1.52188
2.01590
0.91142
1.69041
1.61077
1.14770
3.15939
2.33886
1.25889
1.54395
0.31868
0.80421
1.69462
1.06133
1.85752
1.58589
2.28825
0.93060
2.10072
1.97950
2.90697
1.36346
2.94013
1.13039

Looking at table 2.0, we could see the alphas2 and the betas of the 12 selected firms.
According to Russell Dickerson from ProVest Wealth Advisors, when an alpha has a negative
number, it shows that it is making less return that it should be making for the level of risk it
taking on. Likewise, a positive alpha shows that it is making a greater return known as
abnormal return. (Advisors, 2013)
From the table, the firms alphas are all less than the risk-free rate 3 of 0.01% (1.0).
Most investors would prefer not to take additional risks unless the alpha or the return on stock
is higher than the risk-free rate but there are always some that are willing to take the risk for a
higher return. For instance, if an investor chose to invest in Fifth Third Bank (FITB), he would
1

Rate of return in excess of risk free rate (rit rf)

The abnormal rate of return (excess return) of a stock if the market is neutral or if it is in equilibrium.
Market-neutral is meant by the portfolio avoiding market risk entirely.
3
The expected minimum returns for investments and is usually a three-month U.S. Treasury bill.
2

be facing a relatively high risk but with a positive return. Therefore, the investor would choose
to take the risk for a high return.

3.0. Prediction of Beta and Alpha

No.
1
2
3
4
5
6
7
8
9
10
11

Company Stock

1st
Period
-0.00757
-0.01136
-0.01324
-0.03064
0.00583
-0.00889
-0.00804
-0.01208
-0.02093
-0.01165
0.00743

Alpha
2nd
Period
-0.00514
-0.00497
0.00146
-0.01427
-0.00385
-0.00056
-0.00047
-0.00334
0.00810
-0.01171
0.00459

Forecast
(Y)
-0.00125
-0.00122
-0.00005
-0.00291
-0.00102
-0.00042
-0.00040
-0.00093
0.00115
-0.00245
0.00051

1st
Period
1.52188
0.91142
1.61077
3.15939
1.25889
0.31868
1.69462
1.85752
2.28825
2.10072
2.90697

Beta
2nd
Forecast
Period
(Y)
2.01590 1.48713
1.69041 1.43528
1.14770 1.34883
2.33886 1.53858
1.54395 1.41195
0.80421 1.29411
1.06133 1.33507
1.58589 1.41863
0.93060 1.31425
1.97950 1.48133
1.36346 1.38320

JPMorgan Chase & Co. (JPM)

Bank of New York Mellon (BK)
BB&T Corporation (BBT)
Citigroup (C )
Comerica (CMA)
People's United Bank (PBCT)
PNC Financial Services (PNC)
Sun Trust Bank (STI)
Wells Fargo & Company (WFC)
Zions Bancorporation (ZION)
Fifth Third Bank (FITB)
Huntington Bancshares Inc.
12
-0.01492 0.00343
0.00030 2.94013 1.13039
(HBAN)
Table 3.0: Prediction of beta () and alpha () from the regressed equation

1.34607

Forecast (Y) represents the prediction of beta and alpha for the next two-year period for
all the 12 firms of Financial Global Industry Classification Standard (GICS) selected from S&P
500 (market index). The equation for prediction of beta was derived from the regression
model of the second period beta, of each firm (Y) against the first period beta, of each firm
(X), in which is Y = 0.1593X+1.166. Whereas, the equation for prediction of alpha was
derived from the regression model of the second period alpha, of each firm (Y) against the
first period alpha, of each firm (X), in which is Y = 0.1814X-0.00032.

4.0. Prediction of the next Beta and Alpha

Prediction of the next beta () using the previous is known to work using the
empirical rule. It states that exhibits a statistical property known as mean reversion that
suggest high- securities would exhibit a lower- in the future, while a low- securities would
exhibit a higher in the future. The question then arises, how do we consider to be high or
low? is considered high when it is more than 1, whereas it is low when less than 1. The
simplest way to account for mean reversion is to forecast as a weighted average of the
sample estimate with the value 1. Yet it is hard to obtain a precise statistical estimate of
because the volatility of rates of return is just too large.
Experts usually forecast based on previous statistical data but an unduly historic data
could cause mislead in forecasting from the s that changes over time. Despite that, there are
ways to improve forecasting through Autoregressive Conditional Heteroskedasticity (ARCH) and
augmenting estimator time-series regression. Autoregressive Conditional Heteroskedasticity
(ARCH) method could better predict variance and covariance using high-frequency (daily)
historical data to identify persistent changes. Whereas, augmenting estimator time-series
regression (Dickey-Fuller Test) uses other information about the firm to improve the prediction
of . Therefore, it is save to conclude that the current can be used to predict the future
because its prediction is based on the mean (average) from past historical data, in addition to
the other information of the firm.
Unlike , previous alphas couldnt benefit in the prediction of the next Alpha ()
because alpha specifically measures the performances of the realized return against the
expected return for the risk borne by the investors. In other words, is used to determine the
amount of realized return of the portfolio that varies from the required return. Take for example,
the Capital Asset Pricing Model (CAPM) analysis estimates that the portfolio should earn a 10%
return from the risk of the portfolio, but the actual earning was 15%. Therefore, the alpha
would be 5% (15%-10%), in which indicates an excess return over what was predicted and the
fund that outperformed its benchmark index. Therefore, alpha () is not an appropriate tool to
predict the future .
Both Beta () and Alpha () is also borne out of data because both depend on past
statistical data. However, beta cannot be deemed correct by solely using past statistical data; it
5

has to be based on high-frequency historical data. This also means that an outdated data will
produce an inaccurate prediction. Historical data taken on a daily basis would result in a higher
accuracy in prediction. On the other hand, alpha is not a prediction tool but is also borne out of
data because it depends on realized return of portfolio (Rp), market return (Rm) and Risk-free
rate (Rf) with the equation of

) . Therefore it is safe to conclude that

both and is influenced by data.

5.0.

Explanations

5.1.

Defensive or Aggressive Stocks

A defensive stock can be classified as a stock that provides a constant dividend with

stable earnings regardless of the overall stock market. In other words, it is relatively resistant to
the fluctuation of the business cycle. A defensive stock usually has a beta () or risk that is less
than one. Nevertheless, even with the statement given, occasionally stocks will still change
according to the overall stock market, in which is unpredictable. Therefore, some investors
believe that defensive stocks tend to perform better (rise) than the market during recessions
and below the market during an expansion phase. On the other hand, aggressive stocks are
classified as stocks that generate returns that vary by larger proportion than the overall stock
market, in which their beta also exceeds one. Moreover, aggressive stocks are sensitive to the
fluctuation of the business cycle.
Based on 3.0. Prediction of Beta and Alpha, in the first period, JPMorgan Chase & Co.
(JPM), BB&T Corporation (BBT), Comerica (CMA), PNC Financial Services (PNC), Sun Trust Bank
(STI), Wells Fargo & Company (WFC), Zions Bancorporation (ZION), Fifth Third Bank (FITB),
Huntington Bancshares Inc. (HBAN) are aggressive stocks (>1), whereas Bank of New York
Mellon (BK) is a defensive stock.
In the second period, Wells Fargo & Company (WFC) and Peoples United Bank (PBCT)
are defensive stocks whereas other companies like JPMorgan Chase & Co. (JPM), Bank of
New York Mellon (BK), BB&T Corporation (BBT), Citigroup (C), Comerica (CMA), PNC Financial
Services (PNC), Sun Trust Bank (STI), Zions Bancorporation (ZION), Fifth Third Bank (FITB) and
Huntington Bancshares Inc. (HBAN) are aggressive stocks. For the forecast, all the 12
companies selected are aggressive stocks.
6

5.2.

Low-Beta Firm (Coefficients)

No.

Company Stock

1st
Period
2
Bank of New York Mellon (BK) 0.91142
6 People's United Bank (PBCT)
0.31868
9
Wells Fargo & Company (WFC) 2.28825
Table 5.0: A section derived from Table 3.0: Prediction of

Beta
2nd
Forecast
Period
(Y)
1.69041 1.43528
0.80421 1.29411
0.93060 1.31425
beta () and alpha () from the

regressed equation.
Based on the information given from Nasdaq, beta () is not always a measure of risk.
Instead, beta also measures the co-movement and sensitivity to the market. For instance, a
security can have a zero beta that owns a higher volatility (risk) than the market (Nasdaq,
2011). Aggressive stocks (>1) are mostly construction, leisure, consumer discretionary
items, retail stores, and transportation, while defensive stocks (<1) are utilities, consumer
staples, and health care (Elizalde, 2013).
From the data derived in 3.0 Prediction of Beta and Alpha, there are only 3 companies
that have a beta coefficient that is lower than 1, in which are Bank of New York Mellon (BK),
Peoples United Bank (PBCT) and Wells Fargo & Company (WFC).

Both Bank of New York

Mellon (BK) and Wells Fargo & Company (WFC) are known to be an American Multinational
banking and financial services corporation that provides services such as advisory services,
asset management, broker-dealer, wealth management and so on. Whereas, Peoples United
Bank is a federally chartered stock savings bank in United States that provides the same
financial services as BK and WFC.
It is true that these companies are defensive stocks because these companies major
mostly in banking and financial services that are the least sensitive to the market. Banks are
mostly good defensive stocks that generate income during expansion and recessions. Therefore,
we believe that the low-coefficient () for these 3 banks makes sense in terms that it is not
easily influenced by the fluctuation of the market.

Reference
Advisors, P. W. (Director). (2013). What Do Alpha and Beta Mean for my Investments? [Motion
Picture].
Bodie, Z., Kane, A., & Marcus, A. J. (2013). Essentials of Investments. New York: McGraw-Hill
Education.
Elizalde, R. (2013, April 22). Should you worry that defensive stocks are leading the market?
Retrieved

October

26,

2014,

from

Path

Financial

LLC:

http://www.pathfinancial.net/130422.html
Nasdaq.

(2011).

Beta.

Retrieved

October

26,

http://www.nasdaq.com/investing/glossary/b/beta

2014,

from

Nasdaq

Investing:

Appendix
A1.

JPMorgan Chase & Co (JPM)

60 Months of Monthly Data

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.824275166
R Square
0.679429549
Adjusted R Square
0.673902472
Standard Error
0.05329562
Observations
60
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.349166 0.349166 122.9275 5.9E-16
58 0.164745 0.00284
59 0.513911

CoefficientsStandard Error t Stat

P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
-0.005570386 0.007159 -0.77809 0.439679 -0.0199 0.00876 -0.0199 0.00876
1.681770729 0.151685 11.08727 5.9E-16 1.37814 1.985401 1.37814 1.985401

Intercept
X Variable 1

First Period (30 Months)

SUMMARY OUTPUT
Regression Statistics
Multiple R 0.861344152
R Square 0.741913748
Adjusted R Square
0.732696382
Standard Error
0.048833049
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
1 0.191944 0.191944
28 0.066771 0.002385
29 0.258715

CoefficientsStandard Error t Stat

Intercept -0.007573807 0.009228 -0.82073
X Variable 1 1.521883492 0.169632 8.97167

F
Significance F
80.49086209
9.9795E-10

P-value
Lower 95% Upper 95%Lower 95.0%
Upper 95.0%
0.418732101 -0.026476745 0.011329 -0.02648 0.011329
9.9795E-10 1.174407824 1.869359 1.174408 1.869359

2nd Period (30 Months)

SUMMARY OUTPUT
Regression Statistics
Multiple R 0.803727
R Square 0.645977
Adjusted R Square
0.633334
Standard Error
0.056763
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.164614 0.164614 51.09098 8.88E-08
28 0.090216 0.003222
29 0.25483

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00514 0.010888 -0.47234 0.640342 -0.02745 0.017161 -0.02745 0.017161
X Variable 12.015895 0.28203 7.147795 8.88E-08 1.438182 2.593609 1.438182 2.593609

10

A2.

Huntington Bancshares. Inc (HBAN)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.67427
R Square
0.45464
Adjusted R Square
0.435163
Standard Error
0.175187
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.716381 0.716381 23.34222 4.4E-05
28 0.85933 0.03069
29 1.575711

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.01492 0.033105 -0.45069 0.655681 -0.08273 0.052893 -0.08273 0.052893
X Variable 12.940128 0.608549 4.831379 4.4E-05 1.693573 4.186683 1.693573 4.186683
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.698336
R Square 0.487673
Adjusted R Square
0.469375
Standard Error
0.044068
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.051759 0.051759 26.65255 1.78E-05
28 0.054376 0.001942
29 0.106135

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.003433 0.008453 0.406157 0.687715 -0.01388 0.020749 -0.01388 0.020749
X Variable 11.130388 0.218957 5.162611 1.78E-05 0.681875
1.5789 0.681875
1.5789

11

A3.

Fifth Third Bank (FITB)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.658588
R Square 0.433738
Adjusted R Square
0.413515
Standard Error
0.180702
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.700314 0.700314 21.44711 7.6E-05
28 0.914286 0.032653
29 1.614599

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.007428 0.034148 0.217522 0.829379 -0.06252 0.077376 -0.06252 0.077376
X Variable 1 2.90697 0.627706 4.631102 7.6E-05 1.621173 4.192767 1.621173 4.192767
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.831273
R Square 0.691015
Adjusted R Square
0.679979
Standard Error
0.034678
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.075304 0.075304 62.61916 1.28E-08
28 0.033672 0.001203
29 0.108976

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.00459 0.006652 0.69002 0.495862 -0.00904 0.018216 -0.00904 0.018216
X Variable 11.363463 0.172302 7.913227 1.28E-08 1.010519 1.716408 1.010519 1.716408
12

A4.

Peoples United Bank (PBCT)

1st period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.292792
R Square 0.085727
Adjusted R Square
0.053074
Standard Error
0.056619
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.008416 0.008416 2.625425 0.116374
28 0.089761 0.003206
29 0.098177

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00889 0.010699 -0.83088 0.413073 -0.03081 0.013027 -0.03081 0.013027
X Variable 10.318682 0.196679 1.620316 0.116374 -0.0842 0.721561 -0.0842 0.721561
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.6737
R Square 0.453871
Adjusted R Square
0.434367
Standard Error
0.033554
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.026198 0.026198 23.26996 4.49E-05
28 0.031523 0.001126
29 0.057722

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00056 0.006436 -0.0865 0.931683 -0.01374 0.012627 -0.01374 0.012627
X Variable 10.804211 0.166714 4.823894 4.49E-05 0.462713 1.14571 0.462713 1.14571
13

A5.

PNC Financial Services (PNC)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.707606
R Square 0.500706
Adjusted R Square
0.482874
Standard Error
0.092063
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.237988 0.237988 28.07922 1.23E-05
28 0.237317 0.008476
29 0.475305

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00804 0.017397 -0.4622 0.647507 -0.04368 0.027596 -0.04368 0.027596
X Variable 11.694618 0.319801 5.298983 1.23E-05 1.039536
2.3497 1.039536
2.3497
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.776604
R Square 0.603113
Adjusted R Square
0.588939
Standard Error
0.032747
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
1 0.045628 0.045628
28 0.030026 0.001072
29 0.075654

F Significance F
42.5491 4.53E-07

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00047 0.006282 -0.0745 0.941141 -0.01334 0.012399 -0.01334 0.012399
X Variable 11.061331 0.162707 6.522967 4.53E-07 0.728041 1.394621 0.728041 1.394621
14

A6.

Sun Trust Banks (STI)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.57518
R Square 0.330832
Adjusted R Square
0.306933
Standard Error
0.143722
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.285943 0.285943 13.84298 0.000884
28 0.578372 0.020656
29 0.864315

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.01208 0.02716 -0.44495 0.65978 -0.06772 0.043549 -0.06772 0.043549
X Variable 11.857521 0.499251 3.720615 0.000884 0.834852 2.880191 0.834852 2.880191
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.782043
R Square 0.611591
Adjusted R Square
0.597719
Standard Error
0.04807
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.101877 0.101877 44.08897 3.33E-07
28
0.0647 0.002311
29 0.166577

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00334 0.009221 -0.36201 0.72006 -0.02223 0.01555 -0.02223 0.01555
X Variable 11.585887 0.23884 6.639952 3.33E-07 1.096645 2.075128 1.096645 2.075128
15

A7.

Wells Fargo and Company (WFC)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.809432
R Square 0.655181
Adjusted R Square
0.642866
Standard Error
0.090312
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.433929 0.433929 53.20191 6.1E-08
28 0.228376 0.008156
29 0.662305

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.02093 0.017067 -1.22647 0.230234 -0.05589 0.014028 -0.05589 0.014028
X Variable 12.288251 0.313718 7.293964 6.1E-08 1.645628 2.930874 1.645628 2.930874
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.820456
R Square 0.673148
Adjusted R Square
0.661474
Standard Error
0.024665
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.03508 0.03508 57.66555 2.85E-08
28 0.017033 0.000608
29 0.052114

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.008101 0.004731 1.712364 0.097885 -0.00159 0.017793 -0.00159 0.017793
X Variable 10.930604 0.122548 7.593784 2.85E-08 0.679576 1.181633 0.679576 1.181633
16

A8.

Zions Bancorporations (ZION)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.581733
R Square 0.338414
Adjusted R Square
0.314785
Standard Error
0.159795
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.365718 0.365718 14.32251 0.000747
28 0.714965 0.025534
29 1.080683

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.01165 0.030197 -0.38575 0.702597 -0.0735 0.050207 -0.0735 0.050207
X Variable 12.100716 0.555083 3.784509 0.000747 0.96368 3.237751 0.96368 3.237751
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.804338
R Square 0.646959
Adjusted R Square
0.63435
Standard Error
0.055618
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.158724 0.158724 51.31087 8.53E-08
28 0.086614 0.003093
29 0.245338

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.01171 0.010669 -1.09805 0.281536 -0.03357 0.010139 -0.03357 0.010139
X Variable 11.979497 0.276344 7.163161 8.53E-08 1.413432 2.545562 1.413432 2.545562
17

A9.

BB&T Corporations (BBT)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.691714
R Square 0.478469
Adjusted R Square
0.459843
Standard Error
0.091499
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.215062 0.215062 25.68808 2.3E-05
28 0.234418 0.008372
29 0.44948

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.01324 0.017291 -0.76582 0.45019 -0.04866 0.022177 -0.04866 0.022177
X Variable 11.610767 0.31781 5.068341 2.3E-05 0.959764 2.26177 0.959764 2.26177
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.743337
R Square 0.552549
Adjusted R Square
0.536569
Standard Error
0.039291
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.05338 0.05338 34.57673 2.53E-06
28 0.043227 0.001544
29 0.096607

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.001462 0.007536 0.193956 0.847611 -0.01398 0.016899 -0.01398 0.016899
X Variable 11.147699 0.19518 5.880198 2.53E-06 0.74789 1.547508 0.74789 1.547508
18

A10. Bank of New York Mellon (BK)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.565738
R Square
0.32006
Adjusted R Square
0.295776
Standard Error
0.072271
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.068841 0.068841 13.18008 0.001121
28 0.146246 0.005223
29 0.215087

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.01136 0.013657 -0.83148 0.412736 -0.03933 0.01662 -0.03933 0.01662
X Variable 10.911416 0.251049 3.630438 0.001121 0.397167 1.425666 0.397167 1.425666
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.822941
R Square 0.677232
Adjusted R Square
0.665705
Standard Error
0.044387
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.115749 0.115749 58.74967 2.38E-08
28 0.055166 0.00197
29 0.170914

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00497 0.008514 -0.5837 0.564094 -0.02241 0.012471 -0.02241 0.012471
X Variable 1 1.69041 0.220541 7.664833 2.38E-08 1.238652 2.142168 1.238652 2.142168
19

A11. Citigroup (C)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.705324
R Square 0.497482
Adjusted R Square
0.479535
Standard Error
0.17275
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.827215 0.827215 27.71944 1.34E-05
28 0.835588 0.029842
29 1.662803

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.03064 0.032645 -0.93848 0.356022 -0.09751 0.036233 -0.09751 0.036233
X Variable 13.159392 0.600083 5.264925 1.34E-05 1.930178 4.388607 1.930178 4.388607
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.794911
R Square 0.631883
Adjusted R Square
0.618736
Standard Error
0.067899
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.221585 0.221585 48.06276 1.55E-07
28 0.129089 0.00461
29 0.350673

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.01427 0.013024 -1.09562 0.282581 -0.04095 0.01241 -0.04095 0.01241
X Variable 12.338859 0.337365 6.932731 1.55E-07 1.647798 3.029919 1.647798 3.029919
20

A12. Comerica (CMA)

1st Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.711289
R Square 0.505931
Adjusted R Square
0.488286
Standard Error
0.06768
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.131337 0.131337 28.67229 1.05E-05
28 0.128258 0.004581
29 0.259595

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.005835 0.01279 0.456195 0.651769 -0.02036 0.032033 -0.02036 0.032033
X Variable 11.258892 0.235102 5.354651 1.05E-05 0.777306 1.740477 0.777306 1.740477
2nd Period
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.833572
R Square 0.694842
Adjusted R Square
0.683944
Standard Error
0.038917
Observations
30
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.09656 0.09656 63.75577 1.07E-08
28 0.042407 0.001515
29 0.138967

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00385 0.007465 -0.51546 0.610275 -0.01914 0.011444 -0.01914 0.011444
X Variable 11.543949 0.193363 7.984721 1.07E-08 1.147863 1.940035 1.147863 1.940035
21

A13. Regression of Alpha and Beta

Alpha
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.287097
R Square 0.082424
Adjusted R Square
-0.00933
Standard Error
0.006494
Observations
12
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 3.79E-05 3.79E-05 0.898285 0.365583
10 0.000422 4.22E-05
11 0.00046

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00032 0.002749 -0.11686 0.909283 -0.00645 0.005804 -0.00645 0.005804
X Variable 10.181393 0.191387 0.947779 0.365583 -0.24504 0.607829 -0.24504 0.607829
Beta
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.284829
R Square 0.081128
Adjusted R Square
-0.01076
Standard Error
0.480399
Observations
12
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 0.203759 0.203759 0.882903 0.369549
10 2.307831 0.230783
11 2.51159

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 1.166383 0.347735 3.354232 0.007313 0.391582 1.941184 0.391582 1.941184
X Variable 10.159314 0.16955 0.939629 0.369549 -0.21847 0.537095 -0.21847 0.537095
22