Answer to Question #228776 in Statistics and Probability for Adekunle

Question

1) A researcher obtained the following ordinary least squares (OLS) estimates for a

Nigerian firm’s stock price using 120 observations from 2010 m1 to 2019m12 (All

variables in logarithms):

R² = 0.34, RSS = 1.24, F⁴ ₁₁₅= 3.75

ln s_t = 0.87 - 0.54ln pt + 0.65ln y_t + 0.34ln r_t - 0.32ln m_t

(1.06) (0.24) (0.30) (0.12) (0.24)

s_t are the log of the stock price, p_t is the log of profits, y_t is the log of its output in the Nigerian,

r_t is the log of expenditure on research and development and mt is the log of expenditure on

Marketing. Figures in parentheses are standard errors and RSS is the Residual Sum of Squares.

i) Briefly evaluate the reasons behind including the above explanatory variables in

the regression.

ii) What is the explanatory power of the regression?

iii) Individually using the t-test, test whether each coefficient equals 0, at the 5% level

of significance

iv) Using a t-test does the coefficient on the variable lny_t = 1?