Question

To answer the following questions about LMT's stock price, use the following multiple regression analysis (Show work).

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.988681823
R Square	0.977491746
Adjusted R Square	0.976307101
Standard Error	10.49117857
Observations	61
ANOVA
	df	SS	MS	F	Significance F
Regression	3	272454.9563	90818.31876	825.1347922	6.64497E-47
Residual	57	6273.695181	110.0648277
Total	60	278728.6514
	Coefficients	Standard Error	t Stat	P-value	Lower 95%
Intercept	-1931.41991	243.9210071	-7.918218817	9.39705E-11	-2419.863299
CPI	8.914424548	1.13956563	7.822651293	1.35489E-10	6.632483736
Nasdaq	0.020174909	0.005420724	3.721810856	0.000454545	0.009320096
Inflation	-54.2455964	5.404007141	-10.03803196	3.27142E-14	-65.06693402

a. Using the F-value, determine if the slope of at least one of the predictors in your model is not equal to 0. Based on the F-value, should you proceed to interpret results for the individual predictor variables in your model? Why or Why not?

b. Assuming that your F-value indicated that you could proceed with interpreting results for individual predictor variables, which variable (s) in your model was a significant predictor of LMT's stock price (Intercept)?

c. How much variance in LMT's stock price (Intercept) is shared by the 3 predictor variables? Based on these results, are the 3 predictor variables useful in predicting LMT's stock prices? Why or Why not?

Answer 1

A)

Null hypothesis: All the slopes in the predictors are zero

Alternative hypothesis :

slope of any one model is not equal to zero

Calculated F statistic for the regression model is

F = 825.134

The F critical value with 5% level of significance with (3,57) degrees of freedom is 3.355

Therefore 825.134> 3.355

Hence we reject null hypothesis with 5% level of significance at (3,57) degree of freedom

Hence slope of any one model is not equal to zero

We cannot interpret results for the individual predictor variables in the model which is based on F- values, since F statistics doesn't test the significance of individual slope .so we go for t-test

B)

Here all the variables that is CPI, NASDAQ and INFLATION are significance predictor of LMT'S stock price in the model since the p value for t-test are less than 5% level of significance.

C)

97.75% of variability in LMT'S STOCK price is explained by three predictor variables.therefore variables useful in predicting LMT'S STOCK PRICE