Section 3, C20 pointa) We suppose that the mutiple linear regressione moddl is g

Question

Section 3, C20 pointa) We suppose that the mutiple linear regressione moddl is given as ollows UP bytbi ISSU SIZE +b ISSU SIZE, +b Where for firm i, UP is the trading dewf he proceedingsnvel of IPOs in the first trading day, ISSU SIZE is the LOT-RATE, + ba INDEX+ IPOS, TURNOVER is ratio of shares which are sold in the first trading day to the total understand eot the shares to the total number of account which subscribe the new the logarithm of the whole stock market index which represents the is an error term. issuing shares, and INDEX is macroeconomic trend. ing shares, LOT RATE is the ratio of number of account which Variable Coefficient Std E -Statistic Pob 8,432856 00000 .0000 0.075604 5.104332 0.0000 0.007847 2.509654 00103 0.0000 3 987258 ISSU, SIZE TURNOVER LOT RATE NDEX 235185 0 021846 .146019 0.080383 R-squared 245451 Mean dependent var 02 6307 Probf-statistic) 0.605454 F-statistic Calculate the missing numbers in this table; (1) On the basis of the results of (1) and the above Table, Would we rejeet the hypothes 1 , 2, 3, And Tell why? that b-0-0, (2) What are the final regression model? And give some explanation of the fin 4 at t-1.96(or t=1.5)? model(according to R-squared and F-statistie values)?

Explanation / Answer

The formula for t-statistic = Coefficient/ SE

1)

1) We reject the null hypothesis as the Prob value for all coefficients are less than 0.05

2) The final regression model,

UP= 3.99-0.24*issu_size+0.39*Turnover-0.02*Lot_rate+1.15*Index

Since the R-square is 0.24, though the coefficients are significantly different from zero, the model is able to capture only 24 per cent of variation which needs to be improved by incorporating more number of variables.

Variable Coefficint SE t-stat C -3.9872550 0.7339151 -5.4328560 issu_size -0.2351850 0.0218460 -10.7655864 Turnover 0.3859079 0.0756040 5.1043320 Lot_rate -0.0201641 0.0078470 -2.56965 Index 1.146019 0.0803830 14.2569822

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