Stigler and Friedland (1983) conducted a study to determine whether the separation of company control from company ownership affects company profits. Using data from 69 companies in the United States, the authors estimate the following model: profiti = α + β1asseti
Stigler and Friedland (1983) conducted a study to determine whether the separation of company control from company ownership affects company profits. Using data from 69 companies in the United States, the authors estimate the following model: profiti = α + β1asseti
College Algebra (MindTap Course List)
12th Edition
ISBN:9781305652231
Author:R. David Gustafson, Jeff Hughes
Publisher:R. David Gustafson, Jeff Hughes
Chapter4: Polynomial And Rational Functions
Section4.6: Rational Functions
Problem 11SC: Find the mean hourly cost when the cell phone described above is used for 240 minutes.
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Question
Heteroscedasticity
Stigler and Friedland (1983) conducted a study to determine whether the separation of company control from company ownership affects company profits. Using data from 69 companies in the United States, the authors estimate the following model:
profiti = α + β1asseti + β2management_controli + ei
Where i is company and:
profiti = annual profit (in million dollar)
asseti = company asset (in million dollar)
management_controli = dummy variable that is worth one if the control of the company is held by the manager
The regression results are presented in the table in the picture
a. Explain whether the statements below are TRUE, FALSE, or CANNOT BE DETERMINED. "If there is a heteroscedasticity problem, the confidence interval of the OLS estimator is not valid."
b. Determine the 95% confidence interval for the parameter 2, what can you conclude?
![Source |
df
MS
Number of obs =
69
F( 2,
66)
13.49
Model |
6843.42169
2 3421.71085
Prob > F
0.0000
Residual |
16735.2881
66 253.564972
= 0.2902
R-squared
Adj R-squared = 0.2687
Total | 23578.7098
68 346.745733
Root MSE
= 15.924
profits |
Coef.
Std. Err.
t
P>|t|
[95% Conf. Interval]
assets |
.0274626
.0055847
4.92
0.000
.0163124
.0386128
mcontrol |
-6.186284
3.844436
-1.61
0.112
cons |
8.087969
3.053642
2.65
0.010
1.991175
14.18476](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F78c6de8b-cc80-4bf1-b3fe-35377c6d4492%2Fd6feda2f-3363-488c-b516-9cf684842895%2Fd27bqvk_processed.png&w=3840&q=75)
Transcribed Image Text:Source |
df
MS
Number of obs =
69
F( 2,
66)
13.49
Model |
6843.42169
2 3421.71085
Prob > F
0.0000
Residual |
16735.2881
66 253.564972
= 0.2902
R-squared
Adj R-squared = 0.2687
Total | 23578.7098
68 346.745733
Root MSE
= 15.924
profits |
Coef.
Std. Err.
t
P>|t|
[95% Conf. Interval]
assets |
.0274626
.0055847
4.92
0.000
.0163124
.0386128
mcontrol |
-6.186284
3.844436
-1.61
0.112
cons |
8.087969
3.053642
2.65
0.010
1.991175
14.18476
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