Jensen, Solberg, and Zorn investigated the relationship of insider ownership, debt, and dividend policies in companies. One of their findings was that firms with high insider ownership choose lower levels of both debt and dividends. Shown here is a sample of data of these three variables for 11 different industries. Use the data to develop the equation of the regression model to predict insider ownership by debt ratio and dividend payout. Comment on the regression coefficients.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
Jensen, Solberg, and Zorn investigated the relationship of insider ownership, debt, and dividend policies in companies. One of their findings was that firms with high insider ownership choose lower levels of both debt and dividends. Shown here is a sample of data of these three variables for 11 different industries. Use the data to develop the equation of the regression model to predict insider ownership by debt ratio and dividend payout. Comment on the regression coefficients.
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