Question

In: Statistics and Probability

Data from 2010 & 2011, in millions (source: Billboard Magazine): Company            Annual Revenue Market Valuation Spotify           &nbsp

Data from 2010 & 2011, in millions (source: Billboard Magazine):

Company            Annual Revenue Market Valuation

Spotify                145 3,000

Warner Music     2,888                   3,300

Live Nation         5,600                   1,700

Pandora 241 1,300

EMI                    1,800                   1,900

3a) Find the correlation between annual revenue and market valuation. Is it statistically significant?

3b) Why is the correlation between revenue and market valuation so low?.

Solutions

Expert Solution

Answers:

*******************************************************************************************************************************

Given data:

Annual Revenue Market Validation
1450 3000
2888 3300
5600 1700
2410 1300
1800 1900

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Ans 3a)

The correlation between annual revenue and market valuation is,

Annual Revenue Market Validation
Annual Revenue 1 -0.088819234
Market Validation -0.088819234 1
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 4130.86631 2477.238932 1.667528 0.194001 -3752.813576 12014.5462
Market Validation -0.58092246 1.045332245 -0.55573 0.617151 -3.907636201 2.745791281

Here is the p-value is 0.617 which is greater than 0.05 level of significance which means our null hypothesis is accepted and they are statistically insignificant.

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Ans 3b)

The correlation between revenue and market valuation so low because  Annual Revenue is very low in the case of company Spotify and company Pandora. If the Annual Revenue is high then our correlation value will be high.

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orchestra answered 2 years ago
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