Please consider the questions below and use the tools you acquired in this course to answer them. Show all the steps of your calculations. The term project should be no longer than five pages. 1. Consider an equation to explain salaries of CEOs in terms of annual firm sales, return on equity (roe, in percentage form), and return on the firm's stock (ros, in percentage form) log(salary) = ₁ + ₂log (sales) + B₂roe + B₂ros + u, (i) In terms of the model parameters, state the null hypothesis that, after controlling for sales and roe, ros has no effect on CEO salary. State the alternative that better stock market performance increases a CEO's salary. (ii) Using data, the following equation was obtained by OLS log(salary) = 4.32 +0.280 log(sales) + 0.0174roe + 0.00024 ros (0.32) (0.035) (0.0041) (0.00054) n = 209, R² = 0.283 Give an interpretation to each estimated coefficient. (iii) Test the null hypothesis that ros has no effect on salary against the alternative that ros has a positive effect. Carry out the test at the 10% significance level. (iv) Would you include ros in a final model explaining CEO compensation in terms of firm performance? Explain.
Please consider the questions below and use the tools you acquired in this course to answer them. Show all the steps of your calculations. The term project should be no longer than five pages. 1. Consider an equation to explain salaries of CEOs in terms of annual firm sales, return on equity (roe, in percentage form), and return on the firm's stock (ros, in percentage form) log(salary) = ₁ + ₂log (sales) + B₂roe + B₂ros + u, (i) In terms of the model parameters, state the null hypothesis that, after controlling for sales and roe, ros has no effect on CEO salary. State the alternative that better stock market performance increases a CEO's salary. (ii) Using data, the following equation was obtained by OLS log(salary) = 4.32 +0.280 log(sales) + 0.0174roe + 0.00024 ros (0.32) (0.035) (0.0041) (0.00054) n = 209, R² = 0.283 Give an interpretation to each estimated coefficient. (iii) Test the null hypothesis that ros has no effect on salary against the alternative that ros has a positive effect. Carry out the test at the 10% significance level. (iv) Would you include ros in a final model explaining CEO compensation in terms of firm performance? Explain.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Transcribed Image Text:Please consider the questions below and use the tools you acquired in this course to answer them. Show all the steps of your
calculations. The term project should be no longer than five pages.
1. Consider an equation to explain salaries of CEOs in terms of annual firm sales, return on equity (roe, in percentage form),
and return on the firm's stock (ros, in percentage form)
log(salary) = B₁ + B₂log (sales) + B₂roe + B3ros + u,
(i) In terms of the model parameters, state the null hypothesis that, after controlling for sales and roe, ros has no effect on
CEO salary. State the alternative that better stock market performance increases a CEO's salary.
(ii) Using data, the following equation was obtained by OLS
log(salary) = 4.32 +0.280 log(sales) + 0.0174roe + 0.00024 ros
(0.32) (0.035)
(0.00054)
(0.0041)
n = 209, R² = 0.283
Give an interpretation to each estimated coefficient.
(iii) Test the null hypothesis that ros has no effect on salary against the alternative that ros has a positive effect. Carry out the
test at the 10% significance level.
(iv) Would you include ros in a final model explaining CEO compensation in terms of firm performance? Explain.
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