Question

A financial analyst is examining the relationship between stock prices and earnings per share. She chooses fifteen, publicly traded companies at random and records for each the companys current stock price and the companys earnings per share reported for the past 12 months. Her data are given below, with X denoting the earnings per share from the previous year and y denoting the current stock price (both in dollars). A scatter plot of her data is shown in Figure 1 Also given are the products of the values for earnings per share and current stock price values for each of the fifteen stocks. (These products, written in the column labelled xy, may aid in calculations.) Earnings per Current stock share, x in dollars) 37.42 57.01 37.62 42.77 58.41 32.55 49.83 23.30 25.69 14.08 32.11 18.12 30.00 41.06 42.14 price, y (in dollars) 1.27 3.00 1.55 1.76 2.35 0.84 1.69 0.75 1.04 0.44 1.80 0.87 1.40 1.10 1.56 47.5234 171.03 58.311 75.2752 137.2635 27.342 84.2127 17.475 26.7176 6.1952 57.798 15.7644 42 45.166 65.7384 2.5 0.5 10 20 30 40 50 60 Figure 1 Answer the following. Carry your intermediate computations to at least four decimal places, and round your answer as specified below. (If necessary, consult a list of formulas.) What is the value of the sample correlation coefficient for these data? Round your answer to at least three decimal places

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Answer #1

Correlation between x and y as considered as array 1 and array 2. so excel would be used to find correlation between x and y

- Bring data in to excel sheet.

- use excel formula in cell B18 , highlighted in the below image

AutoSave O Bookl Excel File Home Insert Page Layout Formulas Data Review View Developer Help Power Pivot Analysis Prabhu Tell me w Cut Minion Pro 2e. Wrap Text Number Norr E Copy Paste B 1 u ▼ i j- > ▼스▼ 뉘 Merge & Center ▼ $ ▼ 96 , . 60 00 Conditional Format as Neu 9.00 +.0 Format Painter Formatting Table Clipboard Font Alignment Number B18 Y =CORREL(B2:B1602:C16) 37.42 57.01 37.62 42.77 58.41 32.55 49.83 23.3 25.69 14.08 32.11 18.12 30 41.06 42.14 127 47.5234 3 171.03 1.55 58.311 1.76 75.2752 2.35 137.2635 0.84 27.342 1.69 84.2127 0.75 17.475 1.04 26.7176 0.44 6.1952 1.8 57.798 0.87 15.7644 42 1.1 45.166 1.56 65.7384 4 10 12 13 15 16 17 18 CORRELATION COEFFICIENT 0.864 20 21

0.864 is a correlation coefficient

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