Question:
The 1991 accounting numbers for major league baseball are given in Table P-24. All figures are in millions of dollars. The numerical variables are GtReceit (Gate Receipts), MediaRev (Media Revenue), StadRev (Stadium Revenue), TotRev (Total Revenue), PlayerCt (Player Costs), OpExpens (Operating Expenses), Oplncome (Operating Income = Total Revenue - Operating Expenses), and FranValu (Franchise Value).
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a. Construct the correlation matrix for the variables GtReceit, MediaRev,. . . , FranValu. From the correlation matrix, can you determine a variable that is likely to be a good predictor of FranValu? Discuss.
b. Use stepwise regression to build a model for predicting franchise value using the remaining variables. Are you surprised at the result? Explain.
c. Can we conclude that, as a general rule, franchise value is about twice total revenue? Discuss.
d. Player costs are likely to be a big component of operating expenses. Develop an equation for forecasting operating expenses from player costs. Comment on the strength of the relation. Using the residuals as a guide, identify teams that have unusually low or unusually high player costs as a component of operating expenses.
e. Consider the variables other than FranValu. Given their definitions, are there groups of variables that are multicollinear? If so, identify these sets.
Transcribed Image Text:
TABLE P-24 Accounting Categories for Major League Baseball (S millions) GrReceit MediaRey StadRev TotRev PlayerCt Opkzpens Oplncome Fran Valu Franchise 200 Ny Yank s LADodge 6L0 74 90,0 29.8 59.6 32.5 18,0 79.3 36.0 72.0 500 16.0 91.1 3527170NYMets 304 4.5 0 12.0 88 297 62.4 63 60 TorBUay 24.5403143 815 354 708 19.0 160 BosRdSox 24.4 5.0 50.6 58 395 25.7 19.3 78.0 18.0 60.0 250 120 59.1 23 46.4 275 12.0 645 29.0 58.0 25.5 140 615 20.747.613.9 20.5 14.0 53.6 304 87.2 23.2 76 48.2 217 43.4 270 10.0 649 39.2 66.6 279 5.0 54.1 343 61.770 CalAngls 26.2 50 489 333 533 24.4 53 49.0 27 48.8 23.1 7.5 484 244 48.804 25.2 8.0 460 12.1 31.5 219 55 45.8 24.9 4840 28.8 5.0 51.6 31 54.4 189 38 403 204 40.85 205 32 44.1 24.1 48.241 22.0 5. 4.717.4 41.8 19.4 3.0 38.8 26.4 50.2 23.7 6.6 42.0 19.3 468 235 3.0 39.4 218 436 140 BaltOrio 140 ChWhSox 132 StLCard 132 ChCubs 18.0 123 TxRanger 117 KCRoyals 115 PhilPhil 17 5 OakAthit 19,0 9 SFGiants 0.2 CinnReds 96 SDPadres 95 HousAstr 87 PittPirt 8 Detliger 83 AtBraves 83 Minn Twin 79 SeatMar 77 MilBrews 77 Clevlndn 75 MonExpos 16.2 15.5 14.2 114
