# HW4(1) - Econ 4010 Introduction to Econometrics(Spring 2016...

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Econ 4010: Introduction to Econometrics (Spring 2016) Homework 4 Due: Tuesday April 12 Olivier Parent ( [email protected] ) Assignment 1. We want to analyze whether salaries of CEOs depend on annual firm sales (sales), return on equity (roe) or return on the firm’s stock (ros). Using the file ‘ceo.xls’, estimate the following regression: log ( salary ) = α + β 1 log ( sales ) + β 2 roe + β 3 ros + u (a) Based on the regression output, interpret the significance of all explanatory variables. (b) Based on the regression output, state the hypothesis that none of the variables has any effect on log(salary), i.e. test for model significance. (c) By what percentage is salary predicted to increase if ros increases by 50 points? Does ros share an economically large relationship with salary? (d) By what percentage is salary predicted to increase if sales increase by 10%? (e) Test the individual significance of all variables based on the p- value approach and the t-stat approach. Carry out the tests at α = 10%. Does roe

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• Spring '16
• Jeff Mills

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