Use the data in CEOSAL for this exercise. Consider an equation to explain salaries of CEOs...

Use the data in CEOSAL for this exercise. Consider an equation to explain salaries of CEOs in terms of annual firm sales, return on equity (roe, in percentage form), and return on the firm’s stock (ros, in percentage form). Answer questions after estimating the equation

log(salary)=β0+β1log(sales)+β2roe+β3ros+u.

(3 points) By what percentage is salary predicted to increase if ros increases by 50 points? Does ros have a practically large effect on salary?
(3 points) Test the null hypothesis that ros has no effect on salary against the alternative that ros has a positive effect. Carry out the test at the 10% significance level.
(2 points) Would you include ros in a final model explaining CEO compensation in terms of firm performance? Explain.

salary	sales	roe	ros
1095	27595	14.1	191
1001	9958	10.9	13
1122	6125.9	23.5	14
578	16246	5.9	-21
1368	21783.2	13.8	56
1145	6021.4	20	55
1078	2266.7	16.4	62
1094	2966.8	16.3	44
1237	4570.2	10.5	37
833	2830	26.3	37
567	596.8	25.9	109
933	19773	26.8	-10
1339	40047	14.8	41
937	2513.8	22.3	44
2011	1580.6	56.3	63
1585	6754	12.6	17
905	1066.3	20.4	141
1058	3199.9	1.9	-15
922	1452.7	19.9	56
1220	8995	15.4	28
1022	1212.3	38.7	83
759	2824.2	16.4	21
1414	7621	24.4	-10
1041	4418.3	15.6	74
1688	12343	14.4	15

Expert Solution

orchestra answered 1 year ago

Consider an equation to explain salaries of CEOs in terms of annual firm sales in million...

Consider an equation to explain salaries of CEOs in terms of annual firm sales in million dollars, return on equity (roe, measured in percentage points as the unit), and return on the firm's sock (ros, measured in percentage points as the unit): Asume that the following equation was obtained by OLS: By how much is salary predicted to increase on average if ros increases by 30 percentage points while all other variables are held constant? (Please indicate the solution...

1. A recent survey reported in BusinessWeek dealt with the salaries of CEOs at large corporations...

1. A recent survey reported in BusinessWeek dealt with the salaries of CEOs at large corporations and whether company shareholders made money or lost money. CEO Paid More Than $1 Million CEO Paid Less Than $1 Million Total Shareholders made money 6 15 21 Shareholders lost money 8 4 12 Total 14 19 33 If a company is randomly selected from the list of 33 studied, calculate the probabilities for the following : (a) The CEO made...

Consider the following regression equation for salaries. Female and Male are dummy variables. The value of...

Consider the following regression equation for salaries. Female and Male are dummy variables. The value of Female = 1 for a female and 0 otherwise. The value of Male is 1 for Male and 0 otherwise. ^Sal = 0.88 - 3.58 Female+ 0.25 Age + 1.12 Male a) Describe in words the classical assumption violated by this equation. b) What change would you make to the equation to correct the problem mentioned in a)

Consider the following data: and What is the sample regression equation?

Use the data on snowfall and mood to create a regression equation. Then, you will use...

Use the data on snowfall and mood to create a regression equation. Then, you will use this regression equation to make predictions about negative affect levels. Using your graphing calculator, create a regression equation with the following data: Monthly Snowfall and Mood Total Daily Snowfall Negative Affect Score 5in 10 3in 4 10in 24 12in 30 8in 12 10in 39 24in 50 36in 50 20in 47 Then, use this equation to predict Negative Affect Score for three different snowfall amounts...

Consider the equation of Liouville. a) Write the equation and explain its meaning with words, make...

Consider the equation of Liouville. a) Write the equation and explain its meaning with words, make sure all the variables and symbols are well defined. b) Say what results are important for the validity of that equation.

#11. Consider the (fictitious) data labelled “problem # 11” which gives starting salaries of fresh...

#11. Consider the (fictitious) data labelled “problem # 11” which gives starting salaries of fresh graduates and their CGPA at the time of graduation. (i) Construct a simple linear regression model that predicts the starting salary of a fresh graduate based on his/her CGPA. (a) clearly write the model, and (b) quote the R2 from Excel output and interpret the number. (10 + 5 =15 points) (ii) Using your model in (i) estimate the starting salary of a fresh...

The accompanying data include the total compensation (in $millions) for CEOs of 50 companies and the...

The accompanying data include the total compensation (in $millions) for CEOs of 50 companies and the investment return for a recent year. Company Compensation ($mil) Return (%) Company 1 20.6 17 Company 2 16.3 8 Company 3 27.8 10 Company 4 26.2 0 Company 5 31.2 15 Company 6 23.7 64 Company 7 15.1 54 Company 8 17.9 33 Company 9 11.9 13 Company 10 15.6 6 Company 11 17.9 34 Company 12 14.4 48 Company 13 12.7 21 Company...

Which equation did we use to explain this concept?

According to the Warren Buffett strategy , “Companies can increase their return on equity by increasing their long-term debt-to-equity ratio. Buffett is aware of this, but the idea of adding a couple of points to Berkshire Hathaway's return on equity simply by taking on more debt does not impress him.”Which equation did we use to explain this concept? You do not have to explain anything. Just type out the equation.

Write down the Slutsky equation. (10) Use the Slutsky equation to explain why it is unlikely that...

Write down the Slutsky equation. (10) Use the Slutsky equation to explain why it is unlikely that there could be a Giffen good. (15)

Question