2. (20pts) Suppose we are examining the relationship between the log of CEO\'s s

Question

2. (20pts) Suppose we are examining the relationship between the log of CEO's salaries and the following explanatory variables: log of sales (lsales), log of market value (lmktval) and the tenure for the CEO at the company (in years). After running the regression, we generate the squared residuals uhsq = u2 Consider the below regression output for uhsq Source df MS Number of obS F(3, 173) 4.05 0.0082 -0.0657 Adj R-squared 0.0495 59894 Model 4.3625369 Residual 62.0597844 3 1.45417897 Prob>F 173 .358727077 R-squared Total 66.4223213 176 .377399553 Root MSE uhsq I sales 0805023.0465631 1.73 0.086- ceoten 0188044.0063197 2.98 0.003 Coef. Std Err p> | t | [95% Conf . Interval] -.1724072 0.094 .0170002 0063308 con0520911 .3052239 0.17 0.865.6545333 0114025 2153008 0312781 550351 lmktval0991503 058847 1.68 0 (a) What is the interpretation of the lsales coefficient? (b) What is the interpretation of the ceoten coefficient? (c) What is the p-value for the Breusch-Pagan test? (d) Given the above regression output, what would you need to do when reporting the coeffi- cients from the original log of salary regression?

Explanation / Answer

A) The Isales coefficient is -0.0805023, means as the sales decreases by one unit, the salary of the CEO decreases by 0.0805 times.

B) The ceoten coefficient is 0.0188044, means as the tenure period increases one year, his salary will increase by 0.0188 times.

C) From the regression output P value is 0.0082.

D) We use the 95% confidence interval to interpret the each coefficient with the original data.

Thank you

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