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QUANTITATIVE FOUNDATIONS

Assignment II

Name of Student:
Student ID:
Date Submitted:

Fergie Mc Nish
806005929
August 31, 2014

FERGIE MC NISH: 806005929

QUESTION #8
Table 1: Model Summary - Overall Model Fit
The Model Summary gives us a measure of how well our overall model fits and how well our
predictors; location, advertisement, age and income is able to predict sales of RY stocks
Multiple Correlation Coefficient [R]
Multiple correlation coefficient [R] is a measure of the strength of the relationship between the
sales of RY stocks and the predictors; location, advertisement, age and income. In this case R=
0.982 which tells us theres a strong direct relationship.
Coefficient of Determination [R Square- R2]
The coefficient of determination [R Square- R2] statistic enables us to determine the amount of
explained variation [variance] in sales of RY stocks from the four [4] predictors; location,
advertisement, age and income. R Square varies between zero [0] and one [1].
Conclusion
The R Square indicates that 96.5% of the variations in the dependant variable [sales of RY
stocks] are explained by changes in the independent variable [location, advertisement, age and
income]. The regression equation appears to be very useful for making predictions since the
value of R2 is close to 1. The overall fit is very good. The unexplained variables account for 3.5%
[100% - 96.5%].

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FERGIE MC NISH: 806005929

Table 2: Coefficients - Parameter Estimates


Table 2- Coefficients is used to identify which predictors are significant contributors to the
96.5% of explained variance in sales of RY stocks [i.e., R2 = 0.965] and which ones are not.
Dependent variable - Sales of RY stocks
Independent variables - Location, Advertisement, Age and Income
Hypothesis
H0: = 0 [This independent variable is not a significant predictor of the dependent variable.]
H1: 0 [This independent variable is a significant predictor of the dependent variable.]
Decision Rule
If p-value [sig. value] < 0.05 reject the Null Hypothesis [H0]
If p-value [sig. value] > 0.05 fail to reject the Null Hypothesis [H0]
Conclusion
 The coefficient for advertisement [0.537] is not a significant predictor in sales of RY
stocks because its p-value is 0.211, which is larger than 0.05.
 The coefficient for income [0.065] is not a significant predictor in sales of RY stocks
because its p-value is 0.052, which is larger than 0.05.
 The coefficient for age [0.095] is not a significant predictor in sales of RY stocks
because its p-value is 0.215 which is larger than 0.05.
 The coefficient for location [0.983] is not a significant predictor in sales of RY stocks
because its p-value is 0.104 is larger than .05.
 The intercept [constant] is not a significant predictor in sales of RY stocks because its
p-value is 0.138, which is larger than 0.05.
The constant and the four [4] independent variables; advertisement, income, age and location do
not have any significant impact on the sales of RY stocks.

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FERGIE MC NISH: 806005929

Table 3: ANOVA Analysis of Variance


Since R Square is not a test of statistical significance [it only measures explained variation in
sales of RY stocks from the predictor; location, advertisement, age and income], the F-ratio is
used to test whether or not R Square [R2] could have occurred by chance alone. In short, the Fratio found in the ANOVA table measures the probability of chance departure from a straight
line
Dependent variable - Sales of RY stocks
Independent variables - Location, Advertisement, Age and Income
Hypothesis
H0: All the independent variables equal to zero [0]]. None of the independent variables are
significant predictors of the dependent variable, sales of RY stocks]
H1: At least one independent variable is different from zero [0]. At least one of the independent
variables is a significant predictor of the dependent variable, sales of RY stocks]
Decision Rule
If p-value [sig. value] < 0.05 reject the Null Hypothesis [H0]
If p-value [sig. value] > 0.05 fail to reject the Null Hypothesis [H0]
Conclusion
Since the sig. value [0,000] for the ANOVA table is less than 0.05; therefore at least one of the
independent variables [location, advertisement, age and income] is statistically significant. In
other words, at least one of these variables has an impact on the sales of RY stocks.

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FERGIE MC NISH: 806005929

QUESTION #9
Categorical financial data is captured by the table given. There are both nominal data and ordinal
data.
The name of the test conducted is the Chi-square test for independence, also called Pearsons
Chi-square test or the Chi-square test of association. This test is used to discover if there is a
relationship between two categorical variables.
Null Hypothesis: H0
Alternative Hypothesis: H1
Hypothesis
H0: Type of Financial Institutions and Level of Strict Financial Regulations are independent; no
relationship exists between Type of Financial Institutions and Level of Strict Financial
Regulations.
H1: Type of Financial Institutions and Level of Strict Financial Regulations are dependent; a
relationship exists between Type of Financial Institutions and Level of Strict Financial
Regulations.
Decision rule
If p-value [sig. value] < 0.05 reject the Null Hypothesis [H0]
A relationship exists between Type of Financial Institutions and
Level of Strict Financial Regulations.
If p-value [sig. value] > 0.05 fail to reject the Null Hypothesis [H0]
No relationship exists between Type of Financial Institutions and
Level of Strict Financial Regulations.
Conclusion
The p-valve [sig. value] of 0.007 is less that 0.05 which means that the researcher should reject
the null hypothesis [H0]; a relationship exists between of Financial Institutions and Level of
Strict Financial Regulations.

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FERGIE MC NISH: 806005929

QUESTION #10
The T-Test is a statistical examination of two population mean. A two-sample T-Test examines
whether two samples are different and is commonly used when the variances of two normal
distributions are unknown and when an experiment used a small sample size.
Null Hypothesis: H0
Alternative Hypothesis: H1
Hypothesis
H0: Blackberry stock price = Nokia stock price
[The population means of Blackberry stock price and Nokia stock price are the same]
or
H0: 1 - 2 = 0
H0: 1 = 2
H1: Blackberry stock price Nokia stock price
[The population means of Blackberry stock price and Nokia stock price are different]

H1: 1

or

H1: 1 -

2 0

Decision rule
If p-value [sig. value] < 0.05 reject the Null Hypothesis [H0]
There is no difference in mean Blackberry stock price and the
Nokia stock price.
If p-value [sig. value] > 0.05 fail to reject the Null Hypothesis [H0]
There is a difference in mean Blackberry stock price and the Nokia
stock price.
Conclusion
The p-valve [sig. value] of 0.0000 is less that 0.05 which means that the researcher should reject
the null hypothesis [H0]; therefore the population means of Blackberry stock price and Nokia
stock price are different.

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FERGIE MC NISH: 806005929

QUESTION #11
Combinations: nCr
The order is not important once the items are in the box.
n = what we have
r = what we want
a)
Sector
Energy
Housing

Level of Risk
Low
High

Number of shares
available [n]
8
7

Number of shares
we want [r]
2
4

= 8C27C4
= [28] [35]
= 980

Conclusion
Two [2] low risk stocks and four [4] high risk stocks can be selected by an investor in 980 ways.

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FERGIE MC NISH: 806005929

b)

Sector
Energy
Housing

Level of Risk
Low
High

Number of shares
available [n]
8
7

Number of shares
we want [r]
3
3

= 8C37C3
= [56] [35]
= 1,960

Conclusion
Three [3] low risk stocks and three [3] high risk stocks can be selected by an investor in
1,960 ways.

c) If the investor chooses the first combinations of two [2] low risk stocks and four [4] high
risk stocks the investor will have 980 choices. On the other hand if the investor chooses
the second combinations of three [3] low risk stocks and three [3] high risk stocks the
investor will have 1,960 choices. Therefore is the investors wants the combinations with
the most number of choices, the investor should select the second combination of three
[3] low risk stocks and three [3] high risk stocks. The second combination will give the
investor 980 [1,960=980] more choices than the first combinations.

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