In 1990, Business Week magazine compiled financial data on the 1,000 companies that had the biggest impact on the U.S. economy. Data from a sample of the top 500 companies in Business Week's report were presented in Problem 13 in Chapter 8. In addition to the company name, the following variables were shown:
1990 Rank (X1): Based on company's market value (share price on March 16, 1990, multiplied by available common shares outstanding).
1989 Rank (X2): Rank in 1989 compilation.
P-E Ratio (X3): Price-to-earning ratio based on 1989 earnings and March 16, 1990, share price.
Yield (Y): Annual dividend rate as a percentage of March 16, 1990, share price.
In parts (a) and (b), use variables X1, X2, and X3 as the predictor variables.
a. Use the all possible regressions procedure to suggest a best model.
b. Use the stepwise regression algorithm to suggest a best model.
c. Which model seems to be the better one? Why?