Question 2 8.14. From a sample of 209 firms, Wooldridge obtained the following regres- sion results": log (salary) = 4.32 + 0.280 log (sales) + 0.0174 roe + 0.00024 ros se = (0.32) (0.035) (0.0041) (0.00054) R² = 0.283 where salary = salary of CEO sales = annual firm sales roe = return on equity in percent ros = return on firm's stock and where figures in the parentheses are the estimated standard errors. a. Interpret the preceding regression taking into account any prior expec-

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8.14. From a sample of 209 firms, Wooldridge obtained the following regres-
sion results":
log (salary) = 4.32 + 0.280 log (sales) + 0.0174 roe + 0.00024 ros
se = (0.32) (0.035)
(0.0041)
(0.00054)
R = 0.283
where salary = salary of CEO
sales = annual firm sales
roe = return on equity in percent
ros = return on firm's stock
and where figures in the parentheses are the estimated standard errors.
a. Interpret the preceding regression taking into account any prior expec-
tations that you may have about the signs of the various coefficients.
b. Which of the coefficients are individually statistically significant at the
5 percent level?
c. What is the overall significance of the regression? Which test do you
use? And why?
d. Can you interpret the coefficients of roe and ros as elasticity coeffi-
cients? Why or why not?
Transcribed Image Text:Question 2 8.14. From a sample of 209 firms, Wooldridge obtained the following regres- sion results": log (salary) = 4.32 + 0.280 log (sales) + 0.0174 roe + 0.00024 ros se = (0.32) (0.035) (0.0041) (0.00054) R = 0.283 where salary = salary of CEO sales = annual firm sales roe = return on equity in percent ros = return on firm's stock and where figures in the parentheses are the estimated standard errors. a. Interpret the preceding regression taking into account any prior expec- tations that you may have about the signs of the various coefficients. b. Which of the coefficients are individually statistically significant at the 5 percent level? c. What is the overall significance of the regression? Which test do you use? And why? d. Can you interpret the coefficients of roe and ros as elasticity coeffi- cients? Why or why not?
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