3. Hypothesis testing against a one-sided alternative using thet-statistic, I Su

Question

3. Hypothesis testing against a one-sided alternative using thet-statistic, I Suppose a data set of 200 observations (N 200) was analyzed using OLS to examine the relationship between CEO salary and various measures of firm performance. The regression results are as follows, with standard errors in parentheses: log(salary)-5+ 004) log(Sales+ 0.02) roe +0.0002 ros (0.2) (0.04) (0.009) 4.0E-4) salary-CEO salary . sales-annual firm sales roe- return on equity, in percent . ros- return on stock, in percent «R = 0.290 Based on the number of observations and parameters in the model, there are degrees of freedom. Suppose you want to test the null hypothesis that return on equity has no ceteris paribus effect on the salaries of CEOs. Since you are using a null hypothesis that ,-0, your t-statistic is calculated as( For the one-sided alternative hypothesis 2> and 1% rejection rule .e at the 1% level you should compare your t statistic to the critica value . In this situation, you would the null hypothesis that 2= 0

Explanation / Answer

Answer:

Source

df

Regression

3  

Residual

196

Total

199  

196 degrees of freedom for residual.

t statistic calculated as   0.02/0.009

= 2.2222

Critical value for t statistic = 2.346.

In this situation, you would not reject the null hypothesis .

Source

df

Regression

3  

Residual

196

Total

199  

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