Coefficient of determination, Financial Management

Assignment Help:

Coefficient of Determination

As before,

2081_coefficient of determination.png

Where,

2095_coefficient of determination1.png

We can show that TSS = RSS + ESS

We can also show that

F

= 1248_coefficient of determination2.png

is an F distribution with k degrees of freedom in the numerator and n - (k + 1) degrees of freedom in the denominator.

Let us look at two extreme cases

  1. The model is perfect.

        This implies that ESS = 0 and F = ∞

  1. The model does not exist.

         This implies that RSS = 0 and F = 0

Intuitively, it should then be clear that if F is too small, the model should be rejected.


Related Discussions:- Coefficient of determination

Geographical classification of mutual funds , Geographical Classification o...

Geographical Classification of Mutual Funds : Nations' boundaries provide territorial restrictions on the sale and purchase of mutual fund units or shares as is the case in com

Random number generation, Random Number Generation Since we have said t...

Random Number Generation Since we have said that competitors' average price, quantity sold and cost behave in a random fashion but follow a normal distribution, if we want to d

Explain learning outcomes of financial management, Explain learning outcome...

Explain learning outcomes of financial management By the end of this subject guide as well as having done the relevant readings and activities you should be able to

Advantages and disadvantages of internal rate of return, What are the advan...

What are the advantages and disadvantages of the internal rate of return method? The internal rate of return process is a discounted cash flow method and a number expressed as

Semi-strong-form of efficiency, Semi-Strong form level of Efficiency This...

Semi-Strong form level of Efficiency This level states that share prices reflects all available public information. (past and present information). If the market has achieved thi

Residual method to find cyclical variation, Residual Method We know th...

Residual Method We know that a time series consisting of annual data for longer periods is depicted by trend lines. This facilitates us to isolate the component of secular tre

Selection of a project in financial management, Q. Selection of a project i...

Q. Selection of a project in Financial Management ? The selection of a project is typically made on the following line: (i) In general a project becomes acceptable if it has

Speculating on future exchange rate movements, There is some discussion on ...

There is some discussion on whether Multinational Corporations (MNC's) enhance risk when borrowing foreign currencies. Those in favor of borrowing state that lower costs of financi

Public finance, suppose perfect competition prevails in the market for hote...

suppose perfect competition prevails in the market for hotel rooms. the current market equilibrium price of a stanar hotel room is 100 per night

Fin 2110, 1. Which of the following statements concerning the cash flow pro...

1. Which of the following statements concerning the cash flow production cycle is true? a) The profits reported in a given time period equal the cash flows generated. b) A company’

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd