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HW05_sol

# HW05_sol - Homework 9 Solutions Problem 1 Part A Regression...

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Homework 9 Solutions Page 1 of 6 Problem 1 Part A Regression models were run based on different predictors (highest adjusted R squared highlighted in yellow): Predictors: R Sq. Adj. R Sq. Earnings 0.323 0.297 Dividend 0.524 0.506 Payout 0.195 0.164 Earnings Dividend 0.530 0.492 Earnings Dividend Payout 0.553 0.497 The best model (highest adjust R squared) was: Shareholders = 19,049 + 7,947 * Dividend The same results were obtained using Minitab (see Appendix). Part B The Durbin-Watson test was performed: DW 0.22 d U 1.48 d L 1.33 n 28 k 1 alpha 0.05 Since DW < d L conclude H 1 : ρ > 0 thus there is a problem with serial correlation. Graphical inspection of the actual/forecast and error shows that errors tend to be correlated: Shareholders 20,000 30,000 40,000 50,000 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 Year Shareholders Actual Forecast

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