What is the interpretation of the r2

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You are an analyst for a managed mutual fund. You have been given the task of investigating whether any significant relationship exists between a company's profitability (ROE) and its environmental, social, and governance (ESG) ratings and management (CEO) turnover. A regression is performed with ROE (in percent) as the dependent variable and CEO tenure (in years) and ESG rating as the independent variables. A sample of 40 large-cap companies was used. The regression results are given below

Write the regression equation that can be used to predict sales.

b) Suppose that 4M Associates' corporate ESG rating is 55 and the company's CEO has been in that position for 10.5 years. What is the predicted ROE for 4M Associates?

c) What does the F-statistic tell you about the regression? 

d) Which of the independent variables is significant at the 0.05 level? Explain. 

e) What is the interpretation of the R2?

f) Someone in your firm recommends dividend growth as a third variable. Do you think that would be a reasonable addition? What other variable might be reasonable to add to the regression?

 

Coefficient

Standard Error

t-stat

p- Value

Intercept

9.442

3.343

2.8424

0.008

ESG

0.069

0.058

1.201

0.238

Tenure

0681

0.295

2.308

0.027

ANOVA

SS

MSS

F

Significance F

Regression

240.410

120.205

4.161

0.023

Residual

1069.000

28.892

 

 

Total

1309.410

 

 

 

Multiple R

0.428

 

 

 

Adjuste R^2

0.183

Adjusted R^2

0.139

 

Reference no: EM133056179

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