BRADFORD UNIVERSITY- MZUMBE UNIVERSITY

PROGRAM; UOB-MU/ MSC

COURCE; QUANTITATIVE METHOD
UB NUMBER 11032259

Tutorial 4;

Solution
To run the regression on the specific model
. reg ldiv lcp

Source |

SS

df

MS

Number of obs =

-------------+-----------------------------Model | 55.5353522

F( 1, 110) = 2260.86

1 55.5353522

Prob > F

Residual | 2.70202512 110 .024563865

-------------+------------------------------

112

= 0.0000

R-squared

= 0.9536

Adj R-squared = 0.9532

Total | 58.2373773 111 .524661057

Root MSE

= .15673

-----------------------------------------------------------------------------ldiv |

Coef. Std. Err.

t P>|t|

[95% Conf. Interval]

-------------+---------------------------------------------------------------lcp | 1.017209 .0213931

_cons | -.6143216 .1268267

47.55 0.000
-4.84 0.000

.9748124

1.059605

-.8656624 -.3629809

The results interpreted;

The above results shows the model to behave as follows
Ldividendst = -.6143216 + 1.017209LCPt +ut
The R2 is considered to be very high depicting that the model is suffering from seurious
regress as the Coefficients are approaches to 1%.

b. To plot for the LnDivident against Ln CP to see whether they are stationary.

Graph

1980q1

1985q1

1990q1

1995q1
tim e1

log corporate div idends

2000q1

2005q1

log corporate profits

Intepretation; The results from the above graphs depict that lndivident and lncp tends to
increase upward for this signify that the data is non stationarity.

The order of the co integration can be done by differentiating

-.1

.1

.2

Graph;

-.2

C.

1980q1

1985q1

1990q1

1995q1
time1

log corporate dividends, D

2000q1

2005q1

log corporate profits, D

d.

Application of Dickey-Fuller

. dfuller ldiv

Dickey-Fuller test for unit root

Number of obs =

112

---------- Interpolated Dickey-Fuller --------Test

1% Critical

Statistic

Value

5% Critical
Value

10% Critical
Value

-----------------------------------------------------------------------------Z(t)

0.272

-3.506

-2.889

-2.579

-----------------------------------------------------------------------------MacKinnon approximate p-value for Z(t) = 0.9760

. dfuller lcp

Dickey-Fuller test for unit root

Number of obs =

---------- Interpolated Dickey-Fuller --------Test

1% Critical

Statistic

Value

5% Critical
Value

10% Critical
Value

-----------------------------------------------------------------------------Z(t)

1.078

-3.506

-2.889

-2.579

-----------------------------------------------------------------------------MacKinnon approximate p-value for Z(t) = 0.9950

112

e. Making use of relevant Microsoft commands, conduct the unit test for one of the variables an
comment on the results generated.
. dfuller D.ldiv

Dickey-Fuller test for unit root

Number of obs =

112

---------- Interpolated Dickey-Fuller --------Test

1% Critical

Statistic

Z(t)

Value

-10.657

5% Critical
Value

-3.507

10% Critical
Value

-2.889

-2.579

MacKinnon approximate p-value for Z(t) = 0.0000

dfuller D.lcp

Dickey-Fuller test for unit root

Number of obs =

---------- Interpolated Dickey-Fuller --------Test

1% Critical

Statistic

Value

5% Critical
Value

10% Critical
Value

-----------------------------------------------------------------------------Z(t)

-9.268

-3.507

-2.889

-2.579

112

-----------------------------------------------------------------------------MacKinnon approximate p-value for Z(t) = 0.0000

. reg ldiv lcp

predict e, resid

. dfuller e

Dickey-Fuller test for unit root

Number of obs =

---------- Interpolated Dickey-Fuller --------Test

1% Critical

Statistic

Value

5% Critical
Value

10% Critical
Value

-----------------------------------------------------------------------------Z(t)

-4.080

-3.506

-2.889

-2.579

-----------------------------------------------------------------------------MacKinnon approximate p-value for Z(t) = 0.0010

112