REGRESSION MODEL AND STATISTICS

QUESTION

Answer3.a) The CM has a strong relation ship with each of the variables. But it has the best relationship when expressed as the weighted sum of all the three variables.

SOLUTION

b) The estimation results for the regression is shown in FLR tab in the excel Sheet.

c) The estimation results for the regression is shown in FLR&PGNP tab in the excel Sheet.

d) The estimation results for the regression is shown in FLR_PGNP_TFR tab in the excel Sheet.

e) We would choose the linear regression model because of the coefficient of determination in:

So, there is a strong relation-ship on the variables in case of linear regression.

f) The regression model in d is the best one because of the highest value of COD. The other models b and c are also showing the strong relationship with CM, but the CM is better presented in terms of FLR. PGNP and TFR.

g) We should test which one of the regression has the highest COD. The better the COD, better would be the relationship.

Answer 4.

a) INV=0.0265V+0.152K-9.95+31.37 in case of the general electrics. The obtained relationship is significant because the R square value is equal to 0.705307.

b) INV=0.0524V+0.094K-0.34+8.092 in case of the Westing house.The obtained relationship is significant because the R square value is equal to0.740575.

c) Applying the chow test and the indicator variable test on the pooled data shows that the there is quite similarity beween the data of the two firms.

d) INV=0.015158V+0.14633k+17.91+7.02 in case of the pooled data. The relationship is stronger than the two separate data for GE and WH.

e) The regression values for the significance level=10% has been calculated in excel tabs SignificaceTenWH andSignificaceTenGE. The null hypothesis for these cases stand as H0:p>0.10.

f)The generalized least squares method shows:

therealtion: INV=0.0265+0.152

whereas the white’s variance estimator gives:

INV=0.0524+0.094

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