Question
You are an analyst for a managed mutual fund. You have been given the task of investigating whether any significant relationship exists between a company's
You are an analyst for a managed mutual fund. You have been given the task of investigating whether any significant relationship exists between a company's 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.
b) Suppose that 4M Associates' corporate ESG rating is 55 and the company's CEO has been in that position for 10.5 years. What is the predicted ROE for 4M Associates?
c) What does the F-statistic tell you about the regression?
d) Which of the independent variables is significant at the 0.05 level? Explain.
e) What is the interpretation of the R2 ?
f) 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?
Coefficient | Standard Error | t-stat | p- Value | |
Intercept | 9.442 | 3.343 | 2.8424 | 0.008 |
ESG | 0.069 | 0.058 | 1.201 | 0.238 |
Tenure | 0681 | 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 | |||
Adjuste R^2 | 0.183 | Adjusted R^2 | 0.139 |
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