Bloomberg Personal Finance (July/August 2011) reported the market beta for Texas Instruments was 1.46. Market betas for individual stocks are determined by simple linear regression. For each stock, the dependent variableis its quarterly percentage return (capital appreciation plus dividends) minus the percentage return that could be obtained from a risk free investment (the Treasury Bill rate is used as the risk-free rate). The independent variableis the quarterly percentage return (capital appreciation plus dividends) for the stock market (S&P 500) minus the percentage return from a risk free investment (the Treasury Bill rate). An estimated regression equation is developed with quarterly data; the market beta for the stock is the slope of the estimated regression equation (). The value of the market beta is often interpreted as a measure of the risk associated with the stock. Market betas greater than 1 indicate that the stock is more volatile than the market average; market betas less than 1 indicate that the stock is less volatile than the market average. Suppose the following figures are the differences between the percentage return and the risk-free return for 10 quarters for the S&P500 and Horizon Technology.

S&P500 Horizon
1.2 -0.7
-2.5 -2
-3 -5.5
2 4.7
5 1.8
1.2 4.1
3 2.6
-1 2
0.5 -1.3
2.5 5.5

Requied:
a. Test for a significant relationship at the 0.05 level of significance. (e. g., use p-value from SPSS)
b. Did the estimated regression equation provide a good fit? Explain. (e. g., discuss R-square from SPSS)
c. Use the market betas of Texas Instruments and Horizon Technology to compare the risk associated with the two stocks.