Bonus Question 8. You are given the linear regression model for a firm, Electronic Data Processing...

Bonus Question

8. You are given the linear regression model for a firm, Electronic Data Processing (EDP), where the regression equation is given by:

Unitst = -117.513 – 0.296Pt + 0.036ADt + 0.066 PSEt

(-0.35) (-2.91) (2.56) (4.61)

n= 48 observations

F critical = 2.84 (assuming alpha =.05)

Where Pt is price; ADt is advertising; PSEt is selling expense; and the t-statistics Are indicated within parentheses. The standard error of the estimate or 123.9 units, the coefficient of determination or R2 =97.0 percent, the adjusted coefficient of determination R2-adj = 95.8 percent and the relevant F-statistic is 85.4.

a. What ids the economic interpretation of the bo = -117.513 intercept term? How would you interpret the value for each independent variable’s coefficient estimate?

b. Interpret the coefficient of determination, R2 and the adjusted coefficient of determination R2adjusted.

c. Test the entire regression line using the F-distribution (both the Fcritical and the Fcalculated values were provided in the problem).

d. Using a t critical value of 2.015, based on n-p-1 or 48-3-1 degrees of freedom, which variables should be eliminated from the model ad why?

Expert Solution

orchestra answered 2 years ago

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