Question: An ingenious regression analysis was reported in which the effects

An ingenious regression analysis was reported in which the effects of the 1985 French banking deregulation were assessed. Bank equity was the dependent variable, and each data point was a tax return for a particular quarter and bank in France from 1978 to the time the research was done. This resulted in 325,928 data points, assumed a random sample. The independent variables were Bankdep-average debt in the industry during this period; ROA-the given firm's average return on assets for the entire period, and After-0 before 1985, and 1 after 1985. The variables used in this regression were all cross-products. These variables and their coefficient estimates (with their standard errors) are given below.
After * Bankdep ....... -0.398 (0.035)
After * Bankdep * ROA .... 0.155 (0.057)
After * ROA ∑ ....... -0.072 (0.024)
Bankdep * ROA ...... -0.286 (0.073)
The adjusted R2 was 53%. Carefully analyze these results and try to draw a conclusion about the effects of the 1985 French Banking Deregulation Act.

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  • CreatedJune 03, 2015
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