A recent study by a major financial investment company was interested in determining whether the annual percentage change in stock price for companies is linearly related to the annual percent change in profits for the company.The following data was determined for 8 randomly selected companies: Based upon this sample information,what portion of variation in stock price percentage change is explained by the percent change in yearly income?
A)Approximately 70 percent
B)Nearly 19 percent
C)About 49 percent
D)None of the above

Question

A recent study by a major financial investment company was interested in determining whether the annual percentage change in stock price for companies is linearly related to the annual percent change in profits for the company.The following data was determined for 8 randomly selected companies:  Based upon this sample information,what portion of variation in stock price percentage change is explained by the percent change in yearly income?
A)Approximately 70 percent 
B)Nearly 19 percent 
C)About 49 percent 
D)None of the above

Quizplus · Accepted Answer

Using a linear regression model, the coefficient of determination (R-squared) was found to be 0.49, meaning that approximately 49% of the variation in stock price percentage change can be explained by the percent change in yearly income.

A Recent Study by a Major Financial Investment Company Was