Airasia Berhad Regression

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 Scattergram

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 Regression

Malayan Banking 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.
Malayan Banking Berhad Scattergram
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

Test for individual significance of Rklci at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
t=7.300
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 Malayan Banking
Berhad’s stock.
Test for overall significance of Rklci at 95% confidence level
H 0 :B 2=0
H a :B 2 ≠ 0
0.478814 58
F 1,58= ×
1−0.478814 1
¿ 53.284
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 Malayan Banking Berhad’s stock.

Test for overall fit

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.

Test for heteroscedasticity at 95% Confidence Level

ε^ 2mbb =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.

Lagrange Multiplier ( LM )=n × R 2

¿ 60 ×0.012523
¿ 0.75138
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=1.911964
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.

Petronas Gas Berhad Regression

Petronas Gas 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.
Petronas Gas Berhad Scattergram
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

Test for individual significance of Rklci at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
t=4.711
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 Petronas Gas
Berhad’s stock.
Test for overall significance of Rklci at 95% confidence level
H 0 :B 2=0
H a :B 2 ≠ 0
0.276786 58
F 1,58= ×
1−0.276786 1
¿ 22.19754
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 Petronas Gas Berhad’s stock.

Test for overall fit

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.

Test for heteroscedasticity at 95% Confidence Level

ε^ 2pgas=α 1 +α 2 Rklci + α 3 R 2klci +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.
Lagrange Multiplier ( LM )=n × R 2
¿ 60 ×0.016247
¿ 0.97482
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=2.104829
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.
UWM Holdings Berhad Regression

UMW Holdings 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.
UMW Holdings Berhad Scattergram

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

Test for individual significance of Rklci at 95% confidence level

H 0 :B 2=0
H a :B 2 ≠ 0
t=3.338
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 UMW Holdings
Berhad’s stock.
Test for overall significance of Rklci at 95% confidence level
H 0 :B 2=0
H a :B 2 ≠ 0
0.161169 58
F 1,58= ×
1−0.161169 1
¿ 11.14386
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 UMW Holdings Berhad’s stock.

Test for overall fit

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.

Test for heteroscedasticity at 95% Confidence Level

ε^ 2umws=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.

2
Lagrange Multiplier ( LM )=n × R
¿ 60 ×0.086514
¿ 5.19084
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=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
Below is the result of the auxiliary regression carried out in Gretl.

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.

Microsoft Corporation Regression

Microsoft Corporation’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.
Microsoft Corporation Scattergram

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
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 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
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 the
United States and the rate of return on Microsoft Corporation’s stock.

Test for overall fit

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.

Test for heteroscedasticity at 95% Confidence Level

ε^ 2msft =α 1 +α 2 R us500 +α 3 R2us 500 + 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 0.003063.
Lagrange Multiplier ( LM )=n × R 2
¿ 60 ×0.003063
¿ 0.18378
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=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 Regression

Johnson & Johnson’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.
Johnson & Johnson Scattergram

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
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 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
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 the
United States and the rate of return on Johnson & Johnson’s stock.

Test for overall fit

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.

Test for heteroscedasticity at 95% Confidence Level

ε^ 2jnj =α 1+ α 2 R us500 +α 3 R2us 500 + 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 0.024914.

Lagrange Multiplier ( LM )=n × R 2
¿ 60 ×0.024914
¿ 1.49484
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=1.932621
d L=1.5485
d U =1.6162
4−d U =2.3838
4−d L =2.4515
As d U <d < 4−d U , we fail to reject the null hypothesis. There is no autocorrelation in the
model.
 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
Function r 2=0.245432 r 2=0.47881 4 r 2=0.276786 r 2=0.16116 9 r 2=0.46475 4 r 2=0.36406 6

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There is a There is a There is a There is a There is a There is a
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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 of
Significance
of return on of return on of return on of return on of return on return on market
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Heteroscedasticit No No No No No No
y heteroscedasticity heteroscedasticity heteroscedasticity heteroscedasticity heteroscedasticity heteroscedasticity
No No No No Weak negative No autocorrelation
Autocorrelation
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