OPPapers.com

Linear Programming A507 Mba

Determine the best simple regression model for estimating current stock price. Be sure that you indicate your reasoning for selecting the model for me, interpret and evaluate the model.
The best simple regression model for estimating the current stock price is:
Y = 19.93722 + .115048Profits
Reasoning
This was chosen as the best model because, according to the Rsquared values, profit is the most explanatory variable in the data set. Profit also had a p-value less than the given alpha of .10, so profit has a significant relationship with current stock price.
Interpretation
This equation means that for each additional dollar in profits, the current stock price will go up $0.115048. If profit is zero, the current stock price will be $19.93722. So, for example, if profit is $43.20, then:
Y = 19.93722 + .115048(43.20)
Y = 19.93722 + 4.9700736
Y = 24.9072936
So, if profit is $43.20, the current stock price would be $24.9072936.
Evaluation
Overall, the model is not a very good fit. The Rsquared value is only .13785221, so this indicates that only 13.78% of the variability in the stock price can be explained by its linear relationship with profit. The standard error is 18.71360853, so 90% of the actual stock price will be within +/- $18.71360853 of the estimated stock price. The MAPE is 1.1769, which indicates that that, on average, the estimates are off by 117.69%. So, given these values, the model is not a very good fit. In fact, it seems to be a rather poor fit.
Determine the appropriate model (multiple or simple) that best represents the relationship. Be sure that you indicate your reasoning for selecting the model for me, interpret and evaluate the model.
The model that best represents the relationship is a multiple regression model. The equation can be written as:

Y = 15.8199 + -11.354NASDAQ + .103661Profits + .125682Last Year's Stock Price + .174888PE Ratio

Note: The model uses NASDAQ relative to all other markets.

Reasoning
The multiple...