Question

This data file contains a variety of accounting and financial values that describe 324 companies operating in the information sector in 2010. The largest of these provide telephone services. One column gives the expenses on research and development (R&D), and another gives the total as-sets of the companies. Both columns are reported in millions of dollars. These data need to be expressed on a log scale; otherwise, outlying companies dominate the analysis. Use the natural logs of both variables rather than the original variables in the data table. (Note that the variables are recorded in mil-lions, so 1,000 = 1 billion.)
(a) What difference in R&D spending (as a percentage) is associated with a 1% increase in the assets of a firm? Give your answer as a range, rounded to meaningful precision.
(b) Revise your model to use base 10 logs of assets and R&D expenses. Does using a different base for both log transformations affect your answer to part (a)?
(c) Find a 95% prediction interval for the R&D expenses of a firm with $1 billion in assets. Be sure to express your range on a dollar scale. Do you expect this interval to have 95% coverage?


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  • CreatedJuly 14, 2015
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