The results of the regression analysis have been presented below where the share prices of the

companies have been assumed to be the dependent variable and the goodwill per share and earnings
per share have been assumed to be the independent variables.

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.836241461
R Square 0.699299781
Adjusted R Square 0.695208621
Standard Error 12.60621757
Observations 150
ANOVA
  df SS MS F Significance F
Regression 2 54327.1069 27163.55345 170.9294857 4.3937E-39
Residual 147 23360.75804 158.9167214
Total 149 77687.86494      

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 4.255790113 1.234022553 3.4487134 0.000735088 1.817073641 6.694506586 1.817073641 6.694506586
GWPS -3.225119034 0.801544091 -4.023632721 9.13821E-05 -4.809157165 -1.641080902 -4.809157165 -1.641080902
EPS 0.232882551 0.013137635 17.72636727 2.51084E-38 0.206919518 0.258845583 0.206919518 0.258845583

RESIDUAL OUTPUT

Predicted Share
Observation price Residuals
1 27.78510503 -19.28710503
2 44.65084558 -34.57684558
3 12.21397943 -3.319979432
4 2.678686847 5.666313153
5 -15.24142668 20.75142668
6 -13.78518214 18.67518214
7 1.825796024 5.624203976
8 0.303538441 7.236461559
9 4.789023065 2.550976935
10 2.983711762 3.576288238
11 42.13114007 -11.84114007
12 42.7366347 -11.6066347
13 35.3595086 -7.389508598
14 35.82150555 -3.591505552
15 64.14902035 81.80097965
16 135.7142568 -19.13425677
17 78.52077324 39.47922676
18 93.37900248 39.04099752
19 69.84247411 15.80752589
20 23.72298795 39.34701205
21 8.612072775 -5.351072775
22 6.396828075 -2.818828075
23 -5.628949561 10.10194956
24 8.683071524 -4.061071524
25 11.04415501 -6.133155011
26 11.30536953 -5.015369533
27 4.788301806 1.981698194
28 7.074872362 -0.164872362
29 3.532514141 1.297485859
30 -21.09000582 25.65000582
31 4.41988447 -4.24888447
32 4.078657141 -3.916657141
33 3.850825995 -3.730825995
34 -1.54055253 1.67255253
35 4.398507971 -4.239507971
36 4.018909414 -3.726909414
37 4.358917938 -4.030917938
38 4.226174884 -3.971174884
39 4.180929808 -3.779929808
40 4.121025369 -3.857025369
41 6.09234009 -5.42234009
42 7.332512388 -6.532512388
43 7.68646401 -6.08646401
44 7.041379344 -5.811379344
45 6.247249847 -5.067249847
46 6.0329979 -4.8029979
47 1.177396718 -0.527396718
48 3.746091252 -3.056091252
49 3.010182392 -2.010182392
50 1.818833554 -1.293833554
51 6.180084847 -4.840084847
52 5.475200683 -4.085200683
53 5.501478164 -3.771478164
54 5.593888908 -4.283888908
55 5.285579959 -4.285579959
56 6.013786077 -5.198786077
57 3.236907612 -2.596907612
58 3.429019766 -2.769019766
59 4.600456288 -3.615456288
60 6.763927746 -5.793927746
61 3.822724025 -3.474724025
62 2.369241306 -1.738241306
63 4.046640695 -3.500640695
64 3.313143435 -3.106143435
65 2.908906865 -2.833906865
66 3.800847034 -3.734847034
67 4.540720344 -4.390720344
68 4.283548303 -3.963548303
69 4.253601975 -4.033601975
70 3.184671068 -3.089671068
71 4.255790113 -4.255790113
72 4.255790113 -4.255790113
73 3.018848826 0.891151174
74 2.930447764 0.979552236
75 3.300153394 0.299846606
76 3.920337245 -0.320337245
77 3.805707777 -0.205707777
78 3.487839945 0.112160055
79 3.82728622 -0.22728622
80 3.622349575 -0.022349575
81 7.216037767 -3.056037767
82 1.608937721 1.801062279
83 4.828013704 -1.378013704
84 3.555120477 -0.645120477
85 -9.058057028 10.20805703
86 6.477617756 -4.317617756
87 5.268177499 -2.648177499
88 -1.423455994 4.053455994
89 6.787696875 -3.967696875
90 1.400966265 1.309033735
91 15.23895866 -11.23895866
92 10.53705996 -7.517059958
93 8.474043071 -6.494043071
94 7.486621056 -5.486621056
95 10.28586932 -8.145869315
96 13.18790841 -9.237908408
97 1.606040651 1.533959349
98 4.661883325 -1.511883325
99 -1.640080201 3.600080201
100 4.153816245 -2.833816245
101 0.418287432 4.681712568
102 4.5854901 1.5745099
103 20.51465657 -12.55465657
104 5.315492649 5.394507351
105 7.572132253 6.117867747
106 9.898745408 4.291254592
107 10.05395935 3.186040646
108 6.837851329 9.582148671
109 10.26589016 8.914109837
110 14.79689215 6.55310785
111 7.734551982 -6.824551982
112 9.434092063 -8.244092063
113 7.03074414 -5.98574414
114 5.684289243 -4.779289243
115 5.479030086 -4.569030086
116 2.188936782 -1.423936782
117 6.970015548 -5.550015548
118 7.889579111 -6.299579111
119 7.980725818 -6.640725818
120 0.105320521 1.194679479
121 3.269587655 -2.993587655
122 3.455893696 -3.122893696
123 -5.855064856 6.004064856
124 3.468147749 -3.303147749
125 3.983245639 -3.680245639
126 4.430226119 -3.298226119
127 4.922054077 -3.485054077
128 5.706253103 -3.934253103
129 5.489770733 -2.910770733
130 5.262978366 -3.244978366
131 37.43346369 -15.47946369
132 32.16045202 -6.762452023
133 39.4623685 -8.553368501
134 41.58711841 -11.39411841
135 35.33067519 -13.39467519
136 -26.8971936 47.4471936
137 22.06840409 0.194595907
138 25.49516531 -0.69816531
139 42.17901872 -9.257018718
140 15.29550374 16.87549626
 141 4.255790113 -4.255790113
142 14.55981778 12.60818222
143 -15.54956719 33.51656719
144 -4.218626777 13.09462678
145 -2.761104521 4.709104521
146 -0.916352208 2.561352208
147 4.598269947 3.952730053
148 19.85921661 -14.60921661
149 16.78982459 -13.35982459
150 -14.23245998 16.38245998

Regression analysis output: Summary Output

Multiple R: This is the correlation coefficient which measures the strength of the relationship between
the 2 variables. This can be ranging from -1 to +1 and this value shows strength of the relationship
between the variables. The larger the absolute value, the greater the strength, meaning +1 denotes the
strong positive relationship whereas -1 denotes the strong negative relationship. 0 reflects no
relationship at all.

In the given case, the result of Multiple R is 0.84 (rounded off to 2 decimals) which denotes there is
significantly strong relationship between the EPS, Goodwill per share and the share prices.

R Square: This means the coefficient of determination, which is a measure of goodness of the fit,
meaning it shows how many points are falling on the regression line. This is the sum total of the squared
deviations of the original data from their mean.

In the given case, the result of R square is 0.70 (rounded off to 2 decimals) which denotes that almost
70% of the values fit in the regression analysis model and therefore 70% of the dependent variables (y
values) are explained by the independent variables (x values). In general, the R square value of more
than 0.95 is assumed to be a good fit.

Adjusted R square: This is the R square adjusted for a number of independent variables in the given
model. This is particularly helpful in case of more than 1 independent variable, meaning multiple
regression analysis. Since we are using multiple variables, i.e., goodwill per share and the earnings per
share, this indicator would give a more accurate result. The result here is again 0.70 which indicates
fairly good fit.

Standard error: This is another measure which shows the goodness of the fit and the precision of the
regression analysis. The smaller the result of this measure, the more certain the analyst can be of the
regression model. Standard error is an absolute measure of the average distance that the data points fall
from the regression line. Here the result of standard error is 12.6 which is fairly high.

Observations: This denotes the number of observations in the model. Here it is 150 observations.
Regression analysis output: ANOVA

The second section of the analysis is ANOVA which means Analysis of variance.

This splits the sum of the squares into individual components which further shows the variability in the
regression model.

Df reflects the degree of freedom relating to the source of variance

SS is the sum of squares. The smaller the residual SS from the total SS, the better the model fits the data.
Here the residual SS is 23360 in comparison to the total SS of 77687 which means the model is an
average fit for the data.

MS denotes the mean square. The lower the residual MS, the better it is.

F is the F statistic which is being used to test the overall significance of the model. The result of 170.9 is
a good fit.

Significance F is the p value of the F fit.

The ANOVA section is rarely used in the simple linear regression analysis. However, the last component
is critical and should be used. The significance F shows how reliable the results and model is for the data
meaning the statistical significance. If the result is less than 0.05 or 5%, the model is perfectly fine. In
case it is more than 5%, its better to choose another independent variable. Here in the given case the
result is 4.4, meaning the model is working fine here.

Regression analysis output: coefficients

This is the most significant and useful section for the model. Amongst all the results here, coefficient is
the most important and useful. It helps in building the linear regression equation.

Y = b1x1 + b2x2 + a

In the given case, y is the share price of the company and the x1 is the average Goodwill per share and
x2 is the average earnings per share. B1 is goodwill per share coefficient and B2 is EPS coefficient

Y = (Goodwill per share coefficient * x1) + (earnings per share coefficient * x1) + intercept

Putting in values we get the equation as

Y = (-3.22 * x1) + (0.23* x1) + 4.26

This will help in getting the value of the share given the goodwill per share and the earnings per share.