Interpret the following: a) the meaning of the Y-intercept and slope for your fi

Question

Interpret the following:

a) the meaning of the Y-intercept and slope for your fitted model.

b) the meaning of the coefficient of determination r 2 .

c) the meaning of the standard error of the estimate SYX .

Descriptive Statistics (M1) Dependent Variable 5-Year Return 5-Year Retum 3-Year Retum Mean Standard Error Median Mode 7.72125576 0.16460565 7.55 6.6 Standard Deviation 4.84958533 23.5184779 1.50690568 0.03434486 43.6 17.6 26 6702.05 868 Mean Standard Error Median Mode Standard Deviation Sample Variance Kurtosis Skewness Range Minimumm Maximum Sum Count 10.9929724 0.13799755 11.2 12.3 4.06566164 16.5296045 2.04490721 0.46271107 38 11.9 26.1 9541.9 868 Independent Varibale 3-Year Return Sample Variance Kurtosis Skewness Range Minimumm Maximum 95 % Confidence 5-Year Lower Limit Upper Limit Sum 0.32307216 7.3981836 8.04432792 Count 95% Confidence 3-Year 0.27084833 10.722124 11.2638207 correlation coefficient 0.83729229 coefficient of determination 0.70105838

Explanation / Answer

a) The y-intercept of the fitted model implies that if the 3-year return is 0 units, then the 5 year return on an average will be 5.5731 units.

The slope of the fitted model implies that, the 5-year return increases on an average by 0.7019 units for each unit increase in 3-year return.

b) The coefficient of determination of 0.701 means that the 70.1% of the variation in the dependent variable, that is the 5-year return, is explained by the regression equation on the independent variable, that is, the 3-year return.

c) The standard error of the estimate gives a measure of the average change or fluctuation in the estimate of the slope if different set of sample data.

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