Question

NEED EXPLANATION PLEASE

In the sample Excel output below, companies are classified as one of four types: Computers, Energy, Banking, or Other. Companies of the first three types will have a value of 1 for the appropriate categorical variable and a value of 0 for the other categorical variables. "Other" companies will have a value of O for all three categorical variables. Ceteris paribus, expected corporate returns for Energy companies are Multiple Regression of Corporate Returns Average Corporate Return: 16.581 Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.680 0.463 0.433 6.298 96 Intercept MARGIN DEBTTOCAPITAL Computers Energy Bankin Coefficients Standard Error 2.433 0.054 0.043 2.407 1.956 2.272 18.050 0.073 0.102 7.175 3.928 2.744 /webapps/assessment/review/review.jsp?attempt id-_46698848 1&course_id-_458276_1&content id _10633010 Review Test Submission: Quiz 7- OMGT3223602201930 Selected Answerd. lower than all non-Energy companies. Correct Answer: d. lower than all non-Energy companies.

Answer 1

y^= 18.050 + 0.073 *Margin -0.102 * Debt_to_Capital +7.175*Computer -3.928 Energy -2.744 Banking

now

for Energy

y^= 18.050 + 0.073 *Margin -0.102 * Debt_to_Capital -3.928

for Computers

y^= 18.050 + 0.073 *Margin -0.102 * Debt_to_Capital +7.175

for banking

y^=y^= 18.050 + 0.073 *Margin -0.102 * Debt_to_Capital - 2.744

for others

y^= 18.050 + 0.073 *Margin -0.102 * Debt_to_Capital

now observe that

for Energy ,-3.298 is lowest value {-3.928 as compared to 7.175 for computer , -2.744 for banking and 0 for others}

hence

expected corporate returns for Energy is lower than all non-energy sector}

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