Econometric Report

Cerebral Assassins

Econ216RegressionAnalysis.docx

Home >Mathematics homework help >Statistics homework help >Econometric Report

Introduction:

-Motivated Question? Goal of project is to predict the average P/E ratio for a company.

-Describe the relationship between the dependent variable and each independent variable.

-Highlight which variables are quantitative vs. qualitative.

Regression Analysis:

A. Population Regression Model:

Average P/E Ratio = β0 + β1(Total Revenues) + β2(Total Assets) + β3(Return on Equity) + β4(Earnings per Share) + β5(Chemical) + β6(Electrical Power) + β7(Grocery) + β8(Healthcare Products) + β9(Insurance) + β10(Petroleum) + ε

B. Regression Assumptions:

1. Linearity

2. Homoscedasticity

3. Normality

C. Strength of Our Model:

· Computed R2 is

· The P-Value for the F-Test is (a=0.05)

· Does it suggest that there is or isn’t sufficient evidence that at least one of the independent variables affects the Average P/E ratio??

Table 1- Regression Model

D. Sample Regression Model:

Estimate Average P/E Ratio = b0 + b1Total Revenues + b2Total Assets + b3Return on Equity + b4Earnings per Share + b5Chemical + b6Electrical Power + b7Grocery+ b2Healthcare Products + b2Insurance + b2Petroleum

E. Statistical Significance:

· At a significance level of 0.05, there is [p-value must be < 0.05]

F. Interpretation of Coefficients:

G. Explanation of 95% Confidence Interval:

· Key Independent Interval is [?]

Confidence interval calculation:

· Based on our regression model, we are 95% confident that the Average P/E Ratio will (increase or decrease?), on average, by between [confidence interval] for each additional [key independent interval], holding constant all other independent variables.

H. Multicollinearity:

· The auxiliary regression- None of our variables have a which indicates that there is no sign of multicollinearity.

· Test for incorrect signs

· ??

Table 2 – Correlation Matrix

Recommendations:

· Final thoughts?

· Summary of findings?

Earnings per Share Residual Plot

-34.03079805694577 14.135726719934913 -3.0935062864350851 577.89621693180948 -27.619697592103368 -7.7496195128943057 -39.64005114833887 -20.861757522073368 -22.073539539196481 8.0424596078511108 -46.268951332772602 3.5895554437542003 36.394494490751754 -26.358171553378064 24.296698915960206 8.9970822230622396 23.615217580646949 1.9004239415884854 -9.1305770632870882 0.79701261523599598 7.7541267001625549 101.38427936460708 -14.615677197794209 -7.8459234858847466 13.069432549450834 -4.6497206502132986 -17.495801014191528 -10.825438122850812 -22.418517805509815 -78.760836861792228 -22.064163967381234 37.675419843934428 -8.4331028690105363 40.861291132414756 -2.2202416195500234 -0.64006539639150262 -19.894021925939271 -8.131229650870111 2.9097846344210723 10.195596388800542 -7.0973162194932478 -1.8819135313874824 15.114793899712488 -5.3868585973886027 -21.512709414438557 205.5987398933479 -9.24356696765037 -22.947182876734566 4.835293863928122 22.415537224260422 -4.9515866442420844 28.220988036551351 49.891067516972932 -21.55861055436533 -9.5804444 924687608 14.840009983326397 -26.780650546152931 -35.247344572731137 -25.892645640077745 -16.257770436664696 -5.7127113045848965 -7.1024342455285403 -2.0952107259163775 11.173512343576036 -32.504823930368403 -9.0365045058934967 7.2534573007968035 -16.958777953357206 10.680713912085238 0.89108295706299856 -23.645920159533311 -39.20440015644796 22.20903521389662 -4.4556375044171688 44.955757563779358 -21.940707901105561 -14.467355886332967 12.166106500780003 20.938862316224316 -8.846107507376697 -43.661092866021278 -33.563440106850464 4.7321893578084726 -14.19129659295481 -23.59811872205859 -65.242009462553298 -36.146369476903658 -59.934810066811117 31.399737546130247 -12.294861281783803 -39.607375540679833 -17.003696007518215 -63.386268144000866 -56.918130468930457 -2.8041322484265194 3.4317788336714923 -44.960269790968454 4.5999922271412039 -25.025091307713971 -41.395911041801156

Earnings per Share

Residuals

Total Revenues Residual Plot

7251 14690 20106 8340 3362 19139 36287 3995 14319 19272 1916 6138 16701 1777 954 41950 14935 4353 27757 6817 7678 20018 1356 46653 4678 9235 3631 9562 9666 1064 137242 6369 6508 966 4231 10262 1311 179 3226 1866 6873 2578 22629 660 9189 4899 1674 3010 1868 12685 20857 3144 23637 3048 65906 7514 2388 2138 555 1434 799 2587 2410 1591 3117 6278 30546 2654 12504 6710 15424 129 7379 3049 4190 3999 2300 6778 41296 980 10531 2114 46667 7389 2283 13282 37609 10882 6502 1172 6064 4077 15754 5756 8180 1819 1083 13219 2187 601 -34.03079805694577 14.135726719934913 -3.0935062864350851 577.89621693180948 -27.619697592103368 -7.7496195128943057 -39.64005114833887 -20.861757522073368 -22.073539539196481 8.0424596078511108 -46.268951332772602 3.5895554437542003 36.394494490751754 -26.358171553378064 24.296698915960206 8.9970822230622396 23.615217580646949 1.9004239415884854 -9.1305770632870882 0.79701261523599598 7.7541267001625549 101.38427936460708 -14.615677197794209 -7.8459234858847466 13.069432549450834 -4.6497206502132986 -17.495801014191528 -10.825438122850812 -22.418517805509815 -78.760836861792228 -22.064163967381234 37.675419843934428 -8.4331028690105363 40.861291132414756 -2.2202416195500234 -0.64006539639150262 -19.894021925939271 -8.131229650870111 2.9097846344210723 10.195596388800542 -7.0973162194932478 -1.8819135313874824 15.114793899712488 -5.3868585973886027 -21.512709414438557 205.5987398933479 -9.24356696765037 -22.947182876734566 4.835293863928122 22.415537224260422 -4.9515866442420844 28.220988036551351 49.891067516972932 -21.55861055436533 -9.5804444924687608 14.840009983326397 -26.780650546152931 -35.247344572731137 -25.892645640077745 -16.257770436664696 -5.7127 113045848965 -7.1024342455285403 -2.0952107259163775 11.173512343576036 -32.504823930368403 -9.0365045058934967 7.2534573007968035 -16.958777953357206 10.680713912085238 0.89108295706299856 -23.645920159533311 -39.20440015644796 22.20903521389662 -4.4556375044171688 44.955757563779358 -21.940707901105561 -14.467355886332967 12.166106500780003 20.938862316224316 -8.846107507376697 -43.661092866021278 -33.563440106850464 4.7321893578084726 -14.19129659295481 -23.59811872205859 -65.242009462553298 -36.146369476903658 -59.934810066811117 31.399737546130247 -12.294861281783803 -39.607375540679833 -17.003696007518215 -63.386268144000866 -56.918130468930457 -2.8041322484265194 3.4317788336714923 -44.960269790968454 4.5999922271412039 -25.025091307713971 -41.395911041801156

Total Revenues

Residuals

Return on Equity Residual Plot

Upper 95% 121.2239 0.0010 0.0005 0.3521 -9.9061 76.0544 51.1621 56.4966 59.6356 90.4948 109.8375 -34.03079805694577 14.135726719934913 -3.0935062864350851 577.89621693180948 -27.6196 97592103368 -7.7496195128943057 -39.64005114833887 -20.861757522073368 -22.073539539196481 8.0424596078511108 -46.268951332772602 3.5895554437542003 36.394494490751754 -26.358171553378064 24.296698915960206 8.9970822230622396 23.615217580646949 1.9004239415884854 -9.1305770632870882 0.79701261523599598 7.7541267001625549 101.38427936460708 -14.615677197794209 -7.8459234858847466 13.069432549450834 -4.6497206502132986 -17.495801014191528 -10.825438122850812 -22.418517805509815 -78.760836861792228 -22.064163967381234 37.675419843934428 -8.4331028690105363 40.861291132414756 -2.2202416195500234 -0.64006539639150262 -19.894021925939271 -8.131229650870111 2.9097846344210723 10.195596388800542 -7.0973162194932478 -1.8819135313874824 15.114793899712488 -5.3868585973886027 -21.512709414438557 205.5987398933479 -9.24356696765037 -22.947182876734566 4.835293863928122 22.415537224260422 -4.9515866442420844 28.220988036551351 49.891067516972932 -21.55861055436533 -9.5804444924687608 14.840009983326397 -26.780650546152931 -35.247344572731137 -25.892645640077745 -16.257770436664696 -5.7127113045848965 -7.1024342455285403 -2.0952107259163775 11.173512343576036 -32.504823930368403 -9.0365045058934967 7.2534573007968035 -16.958777953357206 10.680713912085238 0.89108295706299856 -23.645920159533311 -39.20440015644796 22.20903521389662 -4.4556375044171688 44.955757563779358 -21.940707901105561 -14.467355886332967 12.166106500780003 20.938862316224316 -8.846107507376697 -43.661092866021278 -33.563440106850464 4.7321893578084726 -14.19129659295481 -23.59811872205859 -65.242009462553298 -36.146369476903658 -59.934810066811117 31.399737546130247 -12.294861281783803 -39.607375540679833 -17.003696007518215 -63.386268144000866 -56.918130468930457 -2.8041322484265194 3.4317788336714923 -44.960269790968454 4.5999922271412039 -25.025091307713971 -41.395911041801156

Return on Equity

Residuals

Total Assets Residual Plot

Significance F 0.0686 Lower 95% 16.9695 -0.0011 -0.0004 -0.9150 -34.7036 -37.3743 -70.3988 -79.0570 -57.0935 -37.5351 -3.4614 -34.03079805694577 14.135726719934913 -3.0935062864350851 577.89621693180948 -27.619697592103368 -7.7496195128943057 -39.64005114833887 -20.861757522073368 -22.073539539196481 8.0424596078511108 -46.268951332772602 3.5895554437542003 36.394494490751754 -26.358171553378064 24.296698915960206 8.9970822230622396 23.615217580646949 1.9004239415884854 -9.1305770632870882 0.79701261523599598 7.7541267001625549 101.38427936460708 -14.615677197794209 -7.8459234858847466 13.069432549450834 -4.6497206502132986 -17.495801014191528 -10.825438122850812 -22.418517805509815 -78.760836861792228 -22.064163967381234 37.675419843934428 -8.4331028690105363 40.861291132414756 -2.2202416195500234 -0.64006539639150262 -19.894021925939271 -8.131229650870111 2.9097846344210723 10.195596388800542 -7.0973162194932478 -1.8819135313874824 15.114793899712488 -5.3868585973886027 -21.512709414438557 205.5987398933479 -9.24356696765037 -22.947182876734566 4.835293863928122 22.415537224260422 -4.9515866442420844 28.220988036551351 49.891067516972932 -21.55861055436533 -9.5804444924687608 14.840009983326397 -26.780650546152931 -35.247344572731137 -25.892645640077745 -16.257770436664696 -5.7127113045848965 -7.1024342455285403 -2.0952107259163775 11.173512343576036 -32.504823930368403 -9.0365045058934967 7.2534573007968035 -16.958777953357206 10.680713912085238 0.89108295706299856 -23.645920159533311 -39.20440015644796 22.20903521389662 -4.4556375044171688 44.955757563779358 -21.940707901105561 -14.467355886332967 12.1661065007800 03 20.938862316224316 -8.846107507376697 -43.661092866021278 -33.563440106850464 4.7321893578084726 -14.19129659295481 -23.59811872205859 -65.242009462553298 -36.146369476903658 -59.934810066811117 31.399737546130247 -12.294861281783803 -39.607375540679833 -17.003696007518215 -63.386268144000866 -56.918130468930457 -2.8041322484265194 3.4317788336714923 -44.960269790968454 4.5999922271412039 -25.025091307713971 -41.395911041801156

Total Assets

Residuals

Homoscedasticity Scatter Plot

Residuals 45.53079805694577 4.8642732800650865 13.693506286435085 120.40378306819044 48.819697592103367 31.249619512894306 55.740051148338871 61.261757522073367 34.47353953919648 -4.2424596078511101 48.868951332772603 43.610444556245803 -12.294494490751752 39.258171553378062 55.303301084039788 6.2029177769377597 -12.215217580646947 20.499576058411513 25.330577063287087 14.902987384764003 9.9458732998374444 -89.784279364607087 28.91567719779421 35.745923485884745 2.9305674505491659 18.249720650213298 79.295801014191525 36.225438122850811 35.818517805509813 91.360836861792 222 39.164163967381235 -23.275419843934429 30.433102869010536 -29.061291132414755 29.120241619550022 18.440065396391503 60.394021925939271 22.131229650870111 23.690215365578929 4.3044036111994579 20.797316219493247 15.181913531387483 8.9852061002875132 18.086858597388602 48.212709414438557 94.601260106652092 23.74356696765037 29.347182876734564 11.164706136071878 -6.215537224260423 30.951586644242084 -11.92098803655135 -23.29106751697293 29.858610554365331 26.78044449246876 75.859990016673606 51.98065054615293 53.247344572731137 48.292645640077744 34.557770436664697 19.912711304584896 21.502434245528541 16.595210725916377 -1.373512343576035 54.204823930368399 43.2365045058935 19.646542699203195 34.058777953357207 24.71928608791476 55.308917042937004 36.04592015953331 55.504400156447957 -7.5090352138966203 16.455637504417169 -27.955757563779354 35.34070790110556 31.467355886332967 12.433893499219998 -3.5388623162243178 36.046107507376696 56.661092866021278 53.063440106850464 6.7678106421915274 22.391296592954809 37.798118722058589 88.242009462553298 53.146369476903658 76.034810066811119 -20.699737546130248 41.294861281783803 55.107375540679833 34.003696007518215 83.186268144000863 74.11813046893046 38.504132248426522 13.468221166328506 65.460269790968454 22.600007772858795 49.92509130771397 58.395911041801156 -34.03079805694577 14.135726719934913 -3.0935062864350851 577.89621693180948 -27.619697592103368 -7.7496195128943057 -39.64005114833887 -20.861757522073368 -22.073539539196481 8.0424596078511108 -46.268951332772602 3.5895554437542003 36.394494490751754 -26.358171553378064 24.296698915960206 8.9970822230622396 23.615217580646949 1.9004239415884854 -9.1305770632870882 0.79701261523599598 7.7541267001625549 101.38427936460708 -14.615677197794209 -7.8459234858847466 13.069432549450834 -4.6497206502132986 -17.495801014191528 -10.825438122850812 -22.418517805509815 -78.760836861792228 -22.064163967381234 37.675419843934428 -8.4331028690105363 40.861291132414756 -2.2202416195500234 -0.64006539639150262 -19.894021925939271 -8.131229650870111 2.9097846344210723 10.195596388800542 -7.0973162194932478 -1.8819135313874824 15.114793899712488 -5.3868585973886027 -21.512709414438557 205.5987398933479 -9.243566967650 37 -22.947182876734566 4.835293863928122 22.415537224260422 -4.9515866442420844 28.220988036551351 49.891067516972932 -21.55861055436533 -9.5804444924687608 14.840009983326397 -26.780650546152931 -35.247344572731137 -25.892645640077745 -16.257770436664696 -5.7127113045848965 -7.1024342455285403 -2.0952107259163775 11.173512343576036 -32.504823930368403 -9.0365045058934967 7.2534573007968035 -16.958777953357206 10.680713912085238 0.89108295706299856 -23.645920159533311 -39.20440015644796 22.20903521389662 -4.4556375044171688 44.955757563779358 -21.940707901105561 -14.467355886332967 12.166106500780003 20.938862316224316 -8.846107507376697 -43.661092866021278 -33.563440106850464 4.7321893578084726 -14.19129659295481 -23.59811872205859 -65.242009462553298 -36.1 46369476903658 -59.934810066811117 31.399737546130247 -12.294861281783803 -39.607375540679833 -17.003696007518215 -63.386268144000866 -56.918130468930457 -2.8041322484265194 3.4317788336714923 -44.960269790968454 4.5999922271412039 -25.025091307713971 -41.395911041801156

Predicted Average P/E Ratio

Residuals

Histogram of Standardized Residulas

Total

-1.25 to < -0.75 -0.75 to < -0.25 -0.25 to < 0.25 0.25 to < 0.75 1.25 to < 1.75 2.75 to < 3.25 8.25 to < 8.75 5 31 49 12 1 1 1

Coefficients Standard Error t Stat P-‐value Lower 95% Upper 95% Intercept (Average P/E Ratio) 69.0967 26.2344 2.6338 0.0100 16.9695 121.2239 Total Revenues -‐0.0001 0.0005 -‐0.1047 0.9169 -‐0.0011 0.0010 Total Assets 0.0001 0.0002 0.2564 0.7983 -‐0.0004 0.0005 Return on Equity -‐0.2814 0.3189 -‐0.8826 0.3798 -‐0.9150 0.3521 Earnings per Share -‐22.3048 6.2400 -‐3.5745 0.0006 -‐34.7036 -‐9.9061 Chemical 19.3401 28.5430 0.6776 0.4998 -‐37.3743 76.0544 Electrical Power -‐9.6184 30.5894 -‐0.3144 0.7539 -‐70.3988 51.1621 Grocery -‐11.2802 34.1105 -‐0.3307 0.7417 -‐79.0570 56.4966 Healthcare Products 1.2710 29.3735 0.0433 0.9656 -‐57.0935 59.6356 Insurance 26.4798 32.2172 0.8219 0.4133 -‐37.5351 90.4948 Petroleum 53.1880 28.5104 1.8656 0.0654 -‐3.4614 109.8375

CoefficientsStandard Errort StatP-valueLower 95%Upper 95%

Intercept (Average

P/E Ratio) 69.096726.23442.63380.010016.9695121.2239

Total Revenues -0.0001 0.0005-0.10470.9169-0.00110.0010

Total Assets 0.0001 0.00020.25640.7983-0.00040.0005

Return on Equity-0.2814 0.3189-0.88260.3798-0.91500.3521

Earnings per Share-22.3048 6.2400-3.57450.0006-34.7036-9.9061

Chemical 19.340128.54300.67760.4998-37.374376.0544

Electrical Power -9.6184 30.5894-0.31440.7539-70.398851.1621

Grocery -11.280234.1105-0.33070.7417-79.057056.4966

Healthcare Products1.2710 29.37350.04330.9656-57.093559.6356

Insurance 26.479832.21720.82190.4133-37.535190.4948

Petroleum 53.188028.51041.86560.0654-3.4614109.8375

Average P/E Ratio Total Revenues Total Assets Return on Equity Earnings per Share Average P/E Ratio 1 Total Revenues -‐0.0386 1 Total Assets 0.0117 0.3890 1 Return on Equity -‐0.1298 -‐0.0053 -‐0.0533 1 Earnings per Share -‐0.2942 0.30647072 0.1678 0.1605 1

Average P/E RatioTotal RevenuesTotal AssetsReturn on EquityEarnings per Share

Average P/E Ratio1

Total Revenues-0.0386 1

Total Assets 0.01170.38901

Return on Equity-0.1298-0.0053-0.05331

Earnings per Share-0.29420.306470720.16780.16051