The computer database GROWCO describes the characteristics of 100 companies identified by Fortune as among the fastest growing. Three of the variables listed are (1) estimated stock price/earnings ratio next year, (2) annual revenue growth (as a percentage), and (3) annual earnings per share growth (as a percentage). Source: “Fortune’s 100 Fastest-Growing Companies,” Fortune, September 4, 2000, pp. 142–158.
a. Determine the least-squares regression equation for y = next year’s price/earnings ratio estimate as a function of x1 = annual revenue growth and x2 = annual earnings per share growth. Interpret each of the partial regression coefficients.
b. At the 0.05 level, is the overall regression equation significant?
c. Use the 0.05 level in concluding whether each partial regression coefficient differs significantly from zero.
d. Construct a 95% confidence interval for each partial regression coefficient in the population regression equation.