Econometrics - Heteroskedasticity
ECONOMETRICS EXERCISE 3
TRAN THI ANH NGUYET 28 March, 2013
1. The data set CEOSAL2.DTA contains information on 177 CEOs. In this sample, the average annual salary is $865,864,400 with the smallest and largest being $100,000 and $5,299,000,000, respectively. Another most interesting variable is sales with the average being $3,5329,463,000, and its the smallest and largest being $29,000 and $51,300,000. Using the data set, the following OLS regression is obtained: (1) . ˆ lnsalary = 4.58 + 0.192.lnsales + 0.094.lnmktval + 0.017.ceoten − 0.009comten 0.253 .0398 0..0489 0.0055 0.0033
reg lnsalary lnsales lnmktval ceoten comten
Source Model Residual Total ln_salary ln_sales ln_mktval ceoten comten _cons . SS 22.5202805 42.1259326 64.6462131 Coef. .1918844 .0940901 .0169211 -.009415 4.576374 df 4 172 176 MS 5.63007012 .244918213 .367308029 t 4.82 1.92 3.05 -2.82 18.05 P>|t| 0.000 0.056 0.003 0.005 0.000 Number of obs F( 4, 172) Prob > F R-squared Adj R-squared Root MSE = = = = = = 177 22.99 0.0000 0.3484 0.3332 .49489
Std. Err. .039824 .0489194 .0055389 .0033341 .2535074
[95% Conf. Interval] .1132777 -.0024696 .0059882 -.0159959 4.075988 .2704911 .1906498 .0278541 -.002834 5.07676
Interprete the result. OLS Coefficients The main variable of interest is lnsales. If all other factors are unchanged, 10 more percentage of annual sales increases salary per year of a CEO by 1.92%. By mean of level changes, $353,294,630 increase in annual sales, on average, raises the CEO’s salary by $101,740,800. This seems like a reasonably large influence. β2 = 0.94 means that whenever the market value of the firm is 10% higher, the CEO’s salary is predicted to rise about 0.94%, holding other factors fixed. In comparison with 1.92%, this is not a huge effect, but it should not negligible, either. The variable ceoten is years as CEO with the current company and comten is total years with the company with the OLS estimators being 0.0169 and −0.0094, respectively. Other factors
TRAN THI ANH NGUYET 28 March, 2013
1. The data set CEOSAL2.DTA contains information on 177 CEOs. In this sample, the average annual salary is $865,864,400 with the smallest and largest being $100,000 and $5,299,000,000, respectively. Another most interesting variable is sales with the average being $3,5329,463,000, and its the smallest and largest being $29,000 and $51,300,000. Using the data set, the following OLS regression is obtained: (1) . ˆ lnsalary = 4.58 + 0.192.lnsales + 0.094.lnmktval + 0.017.ceoten − 0.009comten 0.253 .0398 0..0489 0.0055 0.0033
reg lnsalary lnsales lnmktval ceoten comten
Source Model Residual Total ln_salary ln_sales ln_mktval ceoten comten _cons . SS 22.5202805 42.1259326 64.6462131 Coef. .1918844 .0940901 .0169211 -.009415 4.576374 df 4 172 176 MS 5.63007012 .244918213 .367308029 t 4.82 1.92 3.05 -2.82 18.05 P>|t| 0.000 0.056 0.003 0.005 0.000 Number of obs F( 4, 172) Prob > F R-squared Adj R-squared Root MSE = = = = = = 177 22.99 0.0000 0.3484 0.3332 .49489
Std. Err. .039824 .0489194 .0055389 .0033341 .2535074
[95% Conf. Interval] .1132777 -.0024696 .0059882 -.0159959 4.075988 .2704911 .1906498 .0278541 -.002834 5.07676
Interprete the result. OLS Coefficients The main variable of interest is lnsales. If all other factors are unchanged, 10 more percentage of annual sales increases salary per year of a CEO by 1.92%. By mean of level changes, $353,294,630 increase in annual sales, on average, raises the CEO’s salary by $101,740,800. This seems like a reasonably large influence. β2 = 0.94 means that whenever the market value of the firm is 10% higher, the CEO’s salary is predicted to rise about 0.94%, holding other factors fixed. In comparison with 1.92%, this is not a huge effect, but it should not negligible, either. The variable ceoten is years as CEO with the current company and comten is total years with the company with the OLS estimators being 0.0169 and −0.0094, respectively. Other factors