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The following regression is estimated for two Australian firms. ROEt+1= +...

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Accounting

The following regression is estimated for two Australian firms.

ROEt+1= + ROEt

Where ROE is the return on equity of firm iin year tand ROEt+1is ROE in the following year.

The coefficient for Ace Ltd was 0.80 and the coefficient for Cobram Ltd was 0.4.

Required:

Provide three potential explanations for why coefficient for Ace Ltd is greater than Cobram Ltd.

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