Consider the following model of stock prices: Price=Bo + B1earning + ɛ. Where earning is the annual profit per share. Price Earning 65 18 45 32 37 52 24 27 19 31 2.35 0.15 1.15 1.1 1.5 1.6 0.55 0.2 0.4 a. Use the method of OLS to estimate the unknown parameters, ßo and ß1. Write the regression equation. b. Calculate SSE, s², s, and and Sa. c. Test for significance of ß1 using a=0.05. Interpret the results.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
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