1.

Multiple regression equation:

RETURN = 0.005 SAT + 0.674 MBA - 0.141 AGE + 0.082 TENURE – 1.148

2. The analysis of the data shows that the performance of a fund does not have a strong
relationship with the variables used to describe a manager.

The coefficient of determination is at 0.015 which means that, on average, only 1.5% of
changes in fund performance (return) are described by the independent (x) variables. It
means that the model does not explain any variability in fund performance and thus, it is
not a valid model.

Standard error tells how wrong the regression model is and the regression output shows
that our model produces a result with possible error of 8.3%.

Null hypothesis of our model is that all the betas are zero β 2 = β3 = β 4= β5 = 0 and the
alternate hypothesis is that at least one of the betas is not zero. F stat for our model is
7.749 with significance F less than the critical value. Based on this, we cannot reject the
null hypothesis and we can conclude that all the betas are zero at the significance level of
0.05

3. The intercept is negative and has a value of 1.148 which means that when all variables are
zero, the fund performance is -1.148. Three variables: SAT score, MBA status and tenure,
 have a positive relation with fund performance, whereas Age tends to negatively impact
the fund performance.

Keeping other variables constant, MBA has a positive impact of 0.674 on fund
performance and an incremental year in Tenure also causes the fund performance to
increase by 0.082 but P-values for the coefficients show that tenure and MBA are not
statistically significant and can be removed to increase the model’s precision.

Age, when increased by 1 year, leads to negative impact on fund performance by 0.141.

4. To test the nature of relationship between dependant and independent variables, we can
use coefficient of correlation. The table below shows coefficients of correlation between
dependant and independent variables.

Using the correlation function from data analysis tool pack in Excel, we get the following
Correlation matrix which shows that none of the x variables has a strong linear
relationship with the y variable.

SAT has the “strongest” linear relation with return.

Tenur
  Return SAT MBA Age e
Return 1
0.08792
SAT 7 1
0.03794 0.00394
MBA 4 7 1
- - 0.02267
Age 0.07565 0.00178 1 1
Tenur - - 0.4395
e 0.02292 0.02216 0.01301 3 1