You are an analyst for a managed mutual fund You have been given the task of investigating whether any significant relationship exists between a companys profitability (ROE) and its environmental, social and governance (ESG) ratings and management (CEO) turnover A regression is performed with ROE (in percent) as the dependent variable and CEO tenure (in years) and ESG rating as the independent variables A sample of 40 large cap companies was used The regression results are given below Coefficient Standard Error t Stat p Value Intercept 9 442 3 343 2 824 0 008 ESG 0 069 0 058 1 201 0 238 Tenure 0 681 0 295 2 308 0 027 ANOVA SS MSS F Significance F Regression 240 410 120 205 4 161 0 023 Residual 1069 000 28 892 Total 1309 410 Multiple R 0 428 R 2 0 183 Adjusted R 2 0 139 Write the regression equation that can be used to predict sales Suppose that 4M Associates corporate ESG rating is 55 and the companys CEO has been in that position for 10 5 years What is the predicted ROE for 4M Associates What does the F statistic tell you about the regression Which of the independent variables is significant at the 0 05 level Explain What is the interpretation of the R 2 Someone in your firm recommends dividend growth as a third variable Do you think that would be a reasonable addition What other variable might be reasonable to add to the regression In your role as investment consultant, you have recently taken on the following 2 clients In 4 5 sentences for each client explain the bias(es) exhibited by the person and identify your approach to advising them Jay has the following characteristics as an investor 1) follows the current trend in investing 2) tends to carry large cash balances 3) when an investment goes his way, he convinces himself that he knew it all along 4) likely to say yes to investments that make sense to him Ann has the following characteristics as an investor 1) researches the market and believes she can forecast market movements, however her information is very limited 2) obsessed with trying to beat the market and tends to hold concentrated portfolios 3) tends to cling to a view about the market when new information is presented to her You are an advisor at a consulting firm that provides advice to a select group of individual investors with large portfolios During the firms weekly management meeting, the following questions about economic indicators were addressed to you In 4 5 sentences per question, provide your answers Why does the federal funds rate matter to stock prices How do low rates impact stock prices Some of your associates doubt that there is a strong relationship between the stock market and the economy because they heard that stock prices typically turn before the economy does Do you agree

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You are an analyst for a managed mutual fund. You have been given the task of investigating whether any significant relationship exists between a companys profitability (ROE) and its environmental, social and governance (ESG) ratings and management (CEO) turnover. A regression is performed with ROE (in percent) as the dependent variable and CEO tenure (in years) and ESG rating as the independent variables. A sample of 40 large cap companies was used. The regression results are given below

Write the regression equation that can be used to predict sales.
Suppose that 4M Associates corporate ESG rating is 55 and the companys CEO has been in that position for 10.5 years. What is the predicted ROE for 4M Associates?
What does the F-statistic tell you about the regression?
Which of the independent variables is significant at the 0.05 level? Explain.
What is the interpretation of the R²?
Someone in your firm recommends dividend growth as a third variable. Do you think that would be a reasonable addition? What other variable might be reasonable to add to the regression?

In your role as investment consultant, you have recently taken on the following 2 clients. In 4-5 sentences for each client explain the bias(es) exhibited by the person and identify your approach to advising them.

Jay has the following characteristics as an investor: 1) follows the current trend in investing 2) tends to carry large cash balances 3) when an investment goes his way, he convinces himself that he knew it all along 4) likely to say yes to investments that make sense to him.
Ann has the following characteristics as an investor: 1) researches the market and believes she can forecast market movements, however her information is very limited 2) obsessed with trying to beat the market and tends to hold concentrated portfolios 3) tends to cling to a view about the market when new information is presented to her.

You are an advisor at a consulting firm that provides advice to a select group of individual investors with large portfolios. During the firms weekly management meeting, the following questions about economic indicators were addressed to you. In 4-5 sentences per question, provide your answers.

Why does the federal funds rate matter to stock prices? How do low rates impact stock prices?
Some of your associates doubt that there is a strong relationship between the stock market and the economy because they heard that stock prices typically turn before the economy does. Do you agree?