In: Statistics and Probability
SUMMARY OUTPUT | ||||||||
Regression Statistics | ||||||||
Multiple R | 0.72707618 | |||||||
R Square | 0.52863977 | |||||||
Adjusted R Square | 0.52550434 | |||||||
Standard Error | 3.57320675 | |||||||
Observations | 455 | |||||||
ANOVA | ||||||||
df | SS | MS | F | Significance F | ||||
Regression | 3 | 6458.02511 | 2152.67504 | 168.601791 | 2.7119E-73 | |||
Residual | 451 | 5758.28072 | 12.7678065 | |||||
Total | 454 | 12216.3058 | ||||||
Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 99.0% | Upper 99.0% | |
Intercept | -0.2501489 | 0.35921136 | -0.6963835 | 0.48654745 | -0.9560846 | 0.45578693 | -1.1793476 | 0.67904987 |
RUK | 0.02507938 | 0.0238127 | 1.05319345 | 0.29281626 | -0.0217182 | 0.07187699 | -0.0365187 | 0.08667745 |
RSUS | 0.71372752 | 0.04232832 | 16.8617037 | 8.0578E-50 | 0.6305423 | 0.79691273 | 0.60423372 | 0.82322131 |
RSJA | 0.22210429 | 0.02999629 | 7.40439254 | 6.5208E-13 | 0.16315445 | 0.28105414 | 0.14451066 | 0.29969792 |
Estimate a multiple linear regression relationship with the U.K. stock returns as the dependent variable, and U.K. Corporate Bond yield (Proxy for Interest rate), U.S. Stock Returns, and Japan Stock Returns as the independent variables using the monthly data covering the sample period 1980-2017
Show estimated regression relationship
Conduct a t-test for statistical significance of the individual slope coefficients at the 1%
level of significance. Provide the interpretation of the significant slope estimates.
Conduct a test for the overall significance of the regression equation at the 1% level of
significance
R2?
A) Let U.K. stock return be denoted by UK . The regression equation is given by :-
UK = 0.02507938 RUK + 0.22210429 RSJA + 0.71372752 RSUS - 0.2501489.
B) The t Statistic is given above and it is defined by
t_stat = coefficient/ standard error and by the t table we can compute the p-value. Here the p-value< 0.01(level of significance) . This is satisfied by only RSUS and RSJA. Therefore, RSUS and RSJA are significant. This means that RSUS and RSJA does effecr the return. But the other two does not show significant effect on return . The positive magnitude of coefficients show that as one of them increase return increases positively.
C) The overall significance will be shown by F statistic . As calculated F (168.601791) > tabulated F. Therefore we can conclude that overall model is significant and the US stock return is dependent on these variables.
D) The is given by 0.52863977 which explains the variation explained by the model.