Linear Regression: Exercises


3. Log returns. You are given a dataframe, data, which contains three columns: date, sp500, and microsoft. The sp500 column contains levels for the S&P 500 index and the microsoft column contains observations on Microsoft's stock price. All data is given at a monthly frequency.

Use the log() and diff() functions to compute the log returns for sp500 and microsoft. You can compute the log returns as follows:

log_return=100(log(pricet)log(pricet1))


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