Question 2 (25 marks) To explain stock price in dollars (price) using total asset in millions of dollars (asset) and number of large share-holders (investors) for listed firms, the following population model is proposed: log (price) = Bo + Bilog(asset) + B investors +u (2.1) Using data from 93 randomly selected listed firms in the U.S., the model is estimated as follows: log(price) = -0.6234 + 0.8083 log(asset) + 0.0381investors, n = 93, R2 = 0.5611 (22) ---------) (0.0987) (0.0224) Q2a (4 marks) If a firm has a total asset of 1.456 million dollars and 3 large share-holders, what is the firm's predicted stock price? (See Instruction 7 at Page 1) Q2b (4 marks) If firm A has the same amount of total asset as firm B, but has 3 more large share-holders than firm B, what is the two firms predicted stock-price difference in percentage? Q2c (2 marks) Interpret the meaning of the estimated coefficient of log(asset). Q2d (7 marks) You expect that more large share-holders are associated with higher stock prices. Test this hypothesis appropriately at the 5% significant level. (See Instruction S at Page 1) Q2e (8 marks) Construct the 99% confidence interval for the population Bi. and then BRIEFLY test whether B1 is statistically different from 1 at the 1% significance level. Question 2 (25 marks) To explain stock price in dollars (price) using total asset in millions of dollars (asset) and number of large share-holders (investors) for listed firms, the following population model is proposed: log (price) = Bo + Bilog(asset) + B investors +u (2.1) Using data from 93 randomly selected listed firms in the U.S., the model is estimated as follows: log(price) = -0.6234 + 0.8083 log(asset) + 0.0381investors, n = 93, R2 = 0.5611 (22) ---------) (0.0987) (0.0224) Q2a (4 marks) If a firm has a total asset of 1.456 million dollars and 3 large share-holders, what is the firm's predicted stock price? (See Instruction 7 at Page 1) Q2b (4 marks) If firm A has the same amount of total asset as firm B, but has 3 more large share-holders than firm B, what is the two firms predicted stock-price difference in percentage? Q2c (2 marks) Interpret the meaning of the estimated coefficient of log(asset). Q2d (7 marks) You expect that more large share-holders are associated with higher stock prices. Test this hypothesis appropriately at the 5% significant level. (See Instruction S at Page 1) Q2e (8 marks) Construct the 99% confidence interval for the population Bi. and then BRIEFLY test whether B1 is statistically different from 1 at the 1% significance level
