Episode Details

In finance, we are constantly on the search of relationships between data, both macro and micro, partly because we want to understand them and mostly because we want to use them in predictions. I start with the session with a classic, a regression of returns on Disney against the S&P 500 to get the slope (beta) and use it to analyze the statistical output. I continue with a macro regression of earnings to price ratios of US stocks against short term and long term treasury rates to analyze how the level of rates has affected stock prices in the past, and how it can be used in assessing whether stocks are correctly priced today. I end with an analysis of price to book ratios, returns on equity and standard deviations for European banks, concluding that higher returns on equity and lower standard deviations go with higher price to book ratios.
Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/Statistics101/Slides/Session5A.pdf
Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/Statistics101/postclass/session5Atest.pdf
Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/Statistics101/postclass/session5Asoln.pdf
Webpage for statistics class: http://people.stern.nyu.edu/adamodar/New_Home_Page/webcaststatistics.htm
YouTube Playlist for this class: https://www.youtube.com/playlist?list=PLUkh9m2BorqmXcRzWFbzcjMd7fYErVexF

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