Question

3. Imagine that you are the CEO of a public company who is interested in understanding the performance of opening prices. You opt to investigate the effects of national income and the federal funds rate on the opening price of the company’s stock. You run a regression based on time series data from 1998 to 2014 and uncovered the following results:

		Sum of Squares		Coefficient	SE
R2: 0.6	Regression	124333.9	Intercept	178.6734192	1022.4591
Adj : 0.54	Residual		GDP	-0.03675341	0.1780875
Observations: 17	Total	207757.3	FFR	72.0785362	25.244572
F Stat: 10.4

(a) What is your dependent variable? (b) What is the error sum of squares? (c) Which of the variables is most likely to affect the opening price of the company’s stock? Why? (d) Explain the result of the coefficient of determination (e) What are some of the probable deficiencies of the regression model?

Answer 1