Question

The following table lists a portion of Major League Baseball’s (MLB’s) leading pitchers, each pitcher’s salary (In $ millions), and earned run average (ERA) for 2008. Salary ERA J. Santana 17.0 2.28 C. Lee 3.0 2.39 ⋮ ⋮ ⋮ C. Hamels 0.2 3.00 Click here for the Excel Data File a-1. Estimate the model: Salary = β0 + β1ERA + ε. (Negative values should be indicated by a minus sign. Enter your answers, in millions, rounded to 2 decimal places.) Salaryˆ= + ERA a-2. Interpret the coefficient of ERA. A one-unit increase in ERA, predicted salary decreases by $3.20 million. A one-unit increase in ERA, predicted salary increases by $3.20 million. A one-unit increase in ERA, predicted salary decreases by $11.92 million. A one-unit increase in ERA, predicted salary increases by $11.92 million. b. Use the estimated model to predict salary for each player, given his ERA. For example, use the sample regression equation to predict the salary for J. Santana with ERA = 2.28. (Round coefficient estimates to at least 4 decimal places and final answers, in millions, to 2 decimal places.) c. Derive the corresponding residuals. (Negative values should be indicated by a minus sign. Round coefficient estimates to at least 4 decimal places and final answers, in millions, to 2 decimal places.)

Answer 1

Given that

we have to Use Excel to estimate the model: Salary = β₀ + β₁ERA + ε. (Negative amounts should be indicated by a minus sign. Enter your answers in millions rounded to 2 decimal places.)