McKesson - Analysis 4-3

FIN4604 Luis Garcia

Regression Analysis Get Started Answer

The process to answer the interpretation questions should be as follows:

· First, look at the p-value for the X variable. If the p-value is less than 0.05, that means the estimated coefficient on the X is reliably different from zero, which also implies there is an association between the two variables (what are they in the assignment?)

· If the p-value is lower than 0.05, then it makes sense to try to understand what the actual coefficient means. For example, if the estimated coefficient is -0.80, this means that for a 1% change in the X variable, the Y variable changes by -0.80%. In this case, that means that if the euro appreciates by 1% (or the dollar depreciates), the value of the company drops by 0.80%

· Finally, you look at the coefficient of determination or R-squared, which tells you how much of the variation in Y is due to variation in X. For example, 30% of the variation in the value of the company may be due to variation in the exchange rate between the dollar and the euro. The remaining 70% is due to other factors.

The above is a very broad description. It should be enough to get started on the assignment, but you should make sure you understand the analysis because it is likely there will be a question on the final exam similar to the interpretation part of the assignment (that is, I will provide the output, and you’ll have to provide the interpretation).