5. Consider the OLS estimator of a model to explain the stock prices of a FTSE 100 company using 120 observations from 2012 m1 to 2021 m 12, all variables are calculated at the end of the month t: log (stock +) 0.86 + 0.54 log (profit £) - 0.65 log (research t)-1.34 log (marketing &) (1.12) (0.24) (20)
5. Consider the OLS estimator of a model to explain the stock prices of a FTSE 100 company using 120 observations from 2012 m1 to 2021 m 12, all variables are calculated at the end of the month t: log (stock +) 0.86 + 0.54 log (profit £) - 0.65 log (research t)-1.34 log (marketing &) (1.12) (0.24) (20)
College Algebra (MindTap Course List)
12th Edition
ISBN:9781305652231
Author:R. David Gustafson, Jeff Hughes
Publisher:R. David Gustafson, Jeff Hughes
Chapter5: Exponential And Logarithmic Functions
Section5.2: Applications Of Exponential Functions
Problem 50E
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Question
Transcribed Image Text:G FTSE 100
6. Consider the OLS estimator of a model to explain the stock prices of
observations from 2012 m1 to 2021 m 12, all variables are calculated
company using 120
at the end of the month t
log (stock +) 0.86 +
0.86 + 0.54 log (profit 6) - 0.65 log (research t)-1.34 log (marketing 6) (6.1)
(1.12) (0.24)
(0.30)
(0.12)
3
n = 120,
R² = 0.34
SSR = 1.29
F = 3.99
:
/
" 116
where stuck t
the
›
in millions
of
stock price in GBP (British Sterling) profit & (the profit before tax
GBP), research & (expenditure on research and development), and marketing t
marketing) are measured in
parentheses, SSR is the Sum of Squared Residuals, and the I statistic for the significance
GBP. Standard errors are reported in
(expenditure
on
millions
of
of
the
regression is
$
provided.
lat What is the interpretation of the coefficient on
as you would expect? Explain your answer.
log (profit t) 7 Is the sign of coefficient
measured in thousands of GBP? Explain your answer. Hint:
Would
your interpretation change is
(b) Looking at the estimates, a colleague claims that the effect of marketing expenses is more than
GBP? Explain your answer. Hint: a million is thousand *thousand
the
profit is
twice as large as the effect of research and development expenses
a suitable test to examine this claim. Clearly specify the null and the alternative
research and development expenses on the stock price. Describe
and assumptions underlying your test. Indicate additional information, if necessary, to conduct such
hypotheses
test.
(c) Anothe colleague gets
hold
of
t
q
a variable small
small, random firm in Bulgaria
which captures the monthly stock price of
Bulgaria from 2012 m 1 to 2021m 12. Excited with the discovery,
the colleague insists un
including additional variables in the model. What are the likely effects of the inclusion of small t
including smallt in the model. Describe the statistical reasoning behind
on the properties of the OLS estimators of the parameters of the model? Explain your answers
intuitively. Hint: the Bulgarian company is completely unrelated with the FTSE company
model.
in the
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