Question: Executive_Compensation. Executive compensation has risen dramatically beyond the rising levels of an average workers wage over the years. Consider the following portion of data which
Executive_Compensation. Executive compensation has risen dramatically beyond the rising levels of an average worker’s wage over the years. Consider the following portion of data which links total compensation (in $ millions) for 455 CEOs with three measures: industry-adjusted return on assets
(ROA), industry-adjusted stock return (Return) and the firm’s size (Assets in $ millions).
Compensation ROA Return Assets 16.58 2.53 −0.15 20917.5 26.92 1.27 0.57 32659.5
⋮ ⋮ ⋮ ⋮
2.3 0.45 0.75 44875.0
a. Estimate three simple linear regression models that use Compensation as the response variable with ROA, Return, or Assets as the explanatory variable. Which model do you select? Explain.
b. Estimate multiple linear regression models that use various combinations of two, or all three, explanatory variables. Which model do you select?
Explain.
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