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UoG ECON*3740
Econometrics: Assignment 1

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**How many CEOs are in their first
**

>year (i.e. ceoten==0)? What is the longest tenure as CEO?

.

. sum salary ceoten

Variable |

Obs

Mean

Std. Dev.

Min

Max

-------------+--------------------------------------------------------salary |

177

865.8644

587.5893

100

5299

ceoten |

177

7.954802

7.150826

0

37

. sum ceoten if ceoten == 0

Variable |

Obs

Mean

Std. Dev.

Min

Max

-------------+--------------------------------------------------------ceoten |

5

0

0

0

0

. summarize ceoten

Variable |

Obs

Mean

Std. Dev.

Min

Max

-------------+--------------------------------------------------------ceoten |

177

7.954802

7.150826

0

37

. *a) The average salary of a CEO is $865,860. The average tenure is 7.95 years. There are 5 CEOs

>in their first year. The longest tenured CEO has been at the job for 37 years.

it indicates a >poor fit as very little of the variation in the yi as captured by the estimated y.850907024 1 . Std.0132 0..0097236 .60378 -----------------------------------------------------------------------------logsalary | Coef.37131 6.000 6. *b) >Does .505498 .33 0.68 0. 175) Prob > F R-squared Adj R-squared Root MSE = = = = = = 177 2. gen .013 which means that the goodness-of-fit is poor and not reasonable as you want a >measurement closer to one.0075 .639686 -----------------------------------------------------------------------------. Err.128 -. . reg Estimate and report the regression results of the simple regression model this model have a reasonable goodness of fit? logsalary = log(salary) logsalary ceoten Source | SS df MS -------------+---------------------------------Model | .1284 0. t P>|t| [95% Conf.850907024 Residual | 63. when the value of R2 is equal or close to 0. Therefore. . Interval] -------------+---------------------------------------------------------------ceoten | .0063645 1.367308029 Number of obs F(1.795306 175 . * b) R2 is 0.364544606 -------------+---------------------------------Total | 64. The goodness-of-fit measures the fraction of the sample variation in y >that is explained by x.0028374 .53 0.6462131 176 .0222846 _cons | 6.0679911 95.

1284 0.367308029 Number of obs F(1.97%.0222846 _cons | 6. . .364544606 -------------+---------------------------------Total | 64.795306 175 .33 0.128 -.37131 6.0132 0.850907024 Residual | 63.639686 -----------------------------------------------------------------------------. * c) The predicted percent increase in salary from one extra year of tenure as CEO is 0. Err.60378 -----------------------------------------------------------------------------lsalary | Coef.000 6.0028374 . Std. reg lsalary ceoten Source | SS df MS -------------+---------------------------------Model | .68 0.0679911 95.53 0. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------ceoten | .6462131 176 .0063645 1.0097236 .850907024 1 ..0075 . * c) What is the predicted percent increase in salary from one extra year of tenure as CEO? .505498 . 175) Prob > F R-squared Adj R-squared Root MSE = = = = = = 177 2.

* e) What is the predicted percent increase in salary from a ten percent increase in sales? . reg lsalary lsales Source | SS df MS -------------+---------------------------------Model | 18.2242794 .000 4. the predicted percent increase in salary from a ten percent increase in sales is 2.2778217 _cons | 4. .1)*100 2. .961077 .51542 -----------------------------------------------------------------------------lsalary | Coef.81 0. 175) Prob > F R-squared Adj R-squared Root MSE = = = = = = 177 68.027129 8.2767 . * d) The fit of this model compare to the one in part b) is significantly better as R2 is now >0. . Err. Std. * e) Therefore.0000 0. How does the fit of this model compare to the one in b)? .35 0. t P>|t| [95% Conf.265656119 -------------+---------------------------------Total | 64.1707372 . . .6462131 176 .28 compared to it being 0.2809 0. display (.27 0.566434 5. .35572 -----------------------------------------------------------------------------.1563922 1 18. .1563922 Residual | 46. . * d) Estimate and report the regression results from a similar model as in b) replacing CEO >tenure with log sales.242794 . Interval] -------------+---------------------------------------------------------------lsales | .24%.000 .013 before..367308029 Number of obs F(1.1999597 24.4898209 175 .2242794 *.

* g) The predicted percent increase in salary from a ten percent increase in market value is >2.000 4.1875437 . Interval] -------------+---------------------------------------------------------------lmktval | . . Std.5327 -----------------------------------------------------------------------------lsalary | Coef.6590501 175 .27 0.6462131 176 .2274 .57%. * g) What is the predicted percent increase in salary from a ten percent increase in market value? .2651797 17.0000 0.2318 0. t P>|t| [95% Conf.1)*100 2. . reg lsalary lmktval Source | SS df MS -------------+---------------------------------Model | 14.3273823 _cons | 4.257463*0.. How does the fit of this model compare to the one in b)? . Err.64 0.000 . .677773 .0354271 7. * f) Estimate and report the regression results from a similar model as in b) replacing CEO >tenure with the company’s log market value. .201135 -----------------------------------------------------------------------------.013.367308029 Number of obs F(1.154411 5.23 in comparison with 0.987163 Residual | 49. * f) The fit of this model in comparison to the one in b) is significantly better as the R2 is >higher at 0. .283766 -------------+---------------------------------Total | 64.257463 . display (.82 0. 175) Prob > F R-squared Adj R-squared Root MSE = = = = = = 177 52.987163 1 14. .57463 .

and log market value.0000 0. Which one do you think is closer >to estimate a causal impact? Why? . I prefer the multivariate model better as it accounts for more causalities giving the numbers being analyzed greater meaning as they have a much smaller standard deviation and a higher confidence interval.2071315 _cons | 4.0789697 173 .15 0.000 3.029 .0053261 2. log sales. CEO tenure.254791732 -------------+---------------------------------Total | 64.0113545 . there are >fewer variables being omitted in determining the causality.0392421 4. Err.2403094 lmktval | .001193 .996073 5.367308029 Number of obs F(3. Std. reg lsalary ceoten lsales lmktval Source | SS df MS -------------+---------------------------------Model | 20..3063 .1628545 .0117054 .0853995 .91 0. if any. . .50477 -----------------------------------------------------------------------------lsalary | Coef. * i) Compare the impact of CEO tenure. How does the R squared compare >to the previous models? Which model do you prefer? Why? .011517 -----------------------------------------------------------------------------. and market value on CEO wages from the last >multivariate model with the impacts from each simple regression.3182 0.51 0.20 0. . .503795 . * i) I think the multivariate model has a closer estimate to a casual impact as it evaluates more >independent variables that effect the affect the dependent variables. sales.85574779 Residual | 44.6462131 176 . t P>|t| [95% Conf.109243 . * h) The R2 in this model is the highest yet meaning that the sample variation has been >significantly reduced by measuring all three regressors simultaneously. . Interval] -------------+---------------------------------------------------------------ceoten | .0222178 lsales | .5672434 3 6.000 . * h) Estimate and report the regression results from a model where you include simultaneously >all three regressors.2572344 17.029 .0495947 2. 173) Prob > F R-squared Adj R-squared Root MSE = = = = = = 177 26. Therefore.20 0.

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