SB2023 Dr.

Le Anh Tuan

Group Assignment 2

Course: Statistics for Business (S1 – 2023)

Topic: Inferential Statistics
Due Date: Apr 28th 23:59 via Elearning. Submissions via emails are not allowed.
Type: PDF File without data, No Presentation.

Suppose you would like to investigate the effect of advertisement on sales growth. You know that
at the same time, other variables such as fixed assets, assets growth, firm age, manufacturing and
retail industry, inflation and GDP growth also influence firm sales growth. You have data for all
of those variables after gathering a random sample of firms from Asia-Pacific nations. These are
the definitions of the variables:

1. Determine the main independent variable, the dependent variable, and control variables
2. Using the variables names, write the linear regression model.
3. Using the “firm_asian” to estimate the model in part (2). Write the OLS regression
function with the estimates for the parameters and the standard errors under them.
4. What is the sample size? What is the maximum value of firm sales growth? What is the
minimum value of firm advertising expense growth?
5. Interpret all coefficients including test significance and economic magnitude. For example,
the coefficient on x1 is 0.001, negative and significant at 1%. A one unit increase in x1 is
associated an increase in y by 0.001 unit.
6. Based on your regression from model above, what percentage of the variation in sales
growth is explained by independent variables?
SB2023 Dr. Le Anh Tuan

7. Calculate the 99% confidence interval for the main independent variable.
8. Check whether multicollinearity exists in your model
9. Calculate mean and standard deviation of predicted value of sales growth and residuals.
10. Can we reject the hypothesis the coefficient on fix = −0.2 against two-sided alternative at
5%?
11. At 1% significance level, test the hypothesis that a 1% increase in GDP growth leads to
1% increase in firm sales growth.
12. To optimize the model, we may consider to drop one or several variables. Which variables
should we drop?
13. Suppose we create a new variable 𝑛𝑜𝑛_𝑟𝑒𝑡𝑎𝑖𝑙 = 1 − 𝑟𝑒𝑡𝑎𝑖𝑙. Can we include this variable
in the above regression? Please explain.
14. Estimate these two following models and report the estimation results in equation forms:
𝑠𝑎𝑙𝑒𝑠_𝑔𝑟𝑜𝑤𝑡ℎ = 𝛽0 + 𝛽1 𝑎𝑑𝑣𝑒𝑟 + 𝛽2 𝑔𝑑𝑝_𝑔𝑟𝑜𝑤𝑡ℎ + 𝛽3 𝑖𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 + 𝑢; (2)
𝑠𝑎𝑙𝑒𝑠_𝑔𝑟𝑜𝑤𝑡ℎ = 𝛽0 + 𝛽1 𝑎𝑑𝑣𝑒𝑟 + 𝛽2 𝑓𝑖𝑥 + 𝛽3 𝑎𝑠𝑠𝑒𝑡_𝑔𝑟𝑜𝑤𝑡ℎ + 𝛽4 𝑎𝑔𝑒 +
𝛽5 𝑚𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑖𝑛𝑔 + 𝛽6 𝑟𝑒𝑡𝑎𝑖𝑙 + 𝑢; (3)
15. Among the models in part (3), model (2), and model (3), which model is the best to
explain the relationship between advertisement and sales growth? Why?
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