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A researcher obtained the ordinary least squares (OLS) estimates for a Ghanaian firm's stock price using...

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Basic Math

A researcher obtained the ordinary least squares (OLS) estimatesfor a Ghanaian firm's stock price using 120 observations from 1980ml to 1989 m 12 (All variables in logarithms) as:

In St = 0.87 -054 In pt + 0.65 Inyt + 0.34 In rt - 0.32 In mt

Standard errors:

pt = (1.06)

yt = (0.24)

rt = (0.12)

mt = (0.24)

Adjusted R2=0.34, RSS = 1.24,F1154 =3.75

St are the log of the stock price, pt isthe log of profit, yt is the log of its output in Ghana,rt is the log of expenditure on research and developmentand mt is the log of expenditure on marketing. Figuresin parentheses are standard errors and RSS is the Residual Sum ofsquares.

Required:

(a) Interpret fully the regression results.

(b) Briefly evaluate the reasons behind including ptand yt as explanatory variables in the regression

(c) What is the explanatory power of the regression?

(d) Test, whether each coefficient equals 0, at the 5% level ofsignificance

(e) Using a t-test, does the coefficient on the variable Inyt = 1?

(f) What are the policy implication of the result

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