A sample of 30 computer hardware companies were observed from Stock Investor Pro

Question

A sample of 30 computer hardware companies were observed from Stock Investor Pro and is located in the INVESTOR tab in the Excel file provided. The data includes price per share, book value per share, and the return on equity per share for each. (15 pts)

a). Develop an estimated regression model that can be used to predict the price per share given the book value per share and the return on equity per share. Use the .05 level of significance.

b). Test the significance of the overall regression model.

c). Use the (t)-test and partial F-test to determine the significance of each independent variable.

d). Do the independent variables make a significant contribution to the regression model? Which one(s) should be included?

            e). Compute the coefficients of partial determination and interpret the results.

            f). Add an interaction term to the model. Does it make a significant contribution to the model?

Company Price        (per share) Book Value (per share) Return on Equity (per share) Amdahl Corp. 12.31 4.94 -49.7 Apple Computer, Inc. 21.75 9.46 -71.8 Auspex Systems, Inc. 11.00 4.95 17.2 Capital Associates 3.25 4.33 5.1 Compaq Computer Corp. 65.50 9.58 20.8 Data General Corp. 35.94 8.46 13.3 Dell Computer Corp. 82.06 2.33 74.5 Digi International 15.00 7.35 -11.9 Digital Equipment Corp. 43.00 22.40 -12.9 En Pointe Technologies 14.25 4.11 18.8 Equitrac Corp. 16.25 6.83 10.7 Franklin Electronic Pbls. 12.88 9.13 9.0 Gateway 2000, Inc. 39.13 6.07 28.8 HP Company 61.50 14.14 18.7 IBM 101.38 20.12 29.9 Ingram Micro, Inc. 28.75 6.35 15.1 Maxwell Technologies, Inc. 30.50 3.78 11.8 MicroAge, Inc. 27.19 12.59 9.8 Micron Electronics, Inc. 16.31 3.64 28.3 Network Computing Devices 11.88 3.56 4.0 Pomeroy Computer Resources 33.00 10.03 16.5 Sequent Computer Systems 28.19 10.64 3.3 Silicon Graphics, Inc. 27.44 9.12 -4.3 Southern Electronics Corp. 15.13 6.15 16.1 Stratus Computer, Inc. 55.50 22.38 11.1 Sun Microsystems, Inc. 48.00 6.40 26.2 Tanden Computers, Inc. 34.24 9.49 8.7 Tech Data Corp. 38.94 10.25 14.3 Unisys Corp. 11.31 0.68 1.6 Vitech America, Inc. 14.63 3.48 24.3

Explanation / Answer

Regression Equation

Price (per share) = 5.88 + 2.536 Book Value (per share)
+ 0.484 Return on Equity (per share)

Coefficients

Term Coef SE Coef T-Value P-Value VIF
Constant 5.88 5.54 1.06 0.299
Book Value (per share) 2.536 0.533 4.76 0.000 1.02
Return on Equity (per share) 0.484 0.117 4.12 0.000 1.02

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value
Regression 2 8544 4272.1 17.66 0.000
Book Value (per share) 1 5472 5472.5 22.62 0.000
Return on Equity (per share) 1 4110 4110.4 16.99 0.000
Error 27 6532 241.9
Total 29 15076

For both independent variables and in both t test and F test,we get p-value=0<0.05,so we can conclude that it has significant effect to predict Price.

So,both  independent variables should be included.

e) coefficients of partial determination= 56.67%

So, 56.67% variablity of price is explained by the above regression equation.

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