You would like to estimate the relationship between annual percentage change in CEO compensation and the...

 

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You would like to estimate the relationship between annual percentage change in CEO compensation and the annual percentage change in sales (sales growth) by running an Ordinary Least Squares (OLS) regression with the following linear regression model: y = a +B₁x + ε Where y = annual percentage change in CEO compensation x = sales growth, and e is the error term Suppose you get a sample of 5 data in the following table. Sales growth 7% 6% 4% 5% -4% Percentage change in CEO compensation 12% 11% 8% 9% 2% (a) Calculate the estimated intercept and the estimated beta coefficient based on the above data. (12 marks) (3 marks) (b) Interpret the estimated intercept. (c) If the sales growth is 3%, what is the expected percentage change in CEO compensation? (3 marks) (d) State any 2 assumptions of the error terms for the OLS to be the Best Linear Unbiased Estimator (BLUE). (4 marks) (e) Suppose the standard error of the beta estimate is 0.0845. Using a 95% confidence interval to test the individual significant of the beta estimate. (6 marks) You would like to estimate the relationship between annual percentage change in CEO compensation and the annual percentage change in sales (sales growth) by running an Ordinary Least Squares (OLS) regression with the following linear regression model: y = a +B₁x + ε Where y = annual percentage change in CEO compensation x = sales growth, and e is the error term Suppose you get a sample of 5 data in the following table. Sales growth 7% 6% 4% 5% -4% Percentage change in CEO compensation 12% 11% 8% 9% 2% (a) Calculate the estimated intercept and the estimated beta coefficient based on the above data. (12 marks) (3 marks) (b) Interpret the estimated intercept. (c) If the sales growth is 3%, what is the expected percentage change in CEO compensation? (3 marks) (d) State any 2 assumptions of the error terms for the OLS to be the Best Linear Unbiased Estimator (BLUE). (4 marks) (e) Suppose the standard error of the beta estimate is 0.0845. Using a 95% confidence interval to test the individual significant of the beta estimate. (6 marks)

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To calculate the estimated intercept and beta coefficient we will use the given data and the OLS regression model a Calculate the estimated intercept and the estimated beta coefficient based on the ab... View the full answer