Partial correlation coefficients , Financial Management

Assignment Help:

In multiple correlation equations we are often interested in finding out how much of the variation in the dependent variable is explained by one independent variable if all the other independent variables are kept constant.

For example in the equation Y = a + b1 X1 + b2 X2 we may want to find out how much variation in Y is explained by X1 if X2 is kept constant. This is given by the partial coefficient of determination. Using our simplified subscripts the partial correlation coefficient is given by R12.3.

where,   R12.3 =  962_partial correlation coefficient.png

is the partial correlation coefficient between Y and X1 when X2 is kept constant. Note that here there are two subscripts 1 and 2 before the dot unlike the single subscript before the dot in the multiple correlation coefficient discussed earlier. In fact if r13 and r23 are zero R12.3 reduces to r12, the simple correlation coefficient between Y and X1.


Related Discussions:- Partial correlation coefficients

Profit maximization-objectives of a business entity, Profit maximization ...

Profit maximization Traditionally, this was considered to be the major goal of the firm. Profit maximization refers to attaining the maximum possible profits throughout the yea

Implementation of the medium term expenditure framework, Question: (a) ...

Question: (a) Show how the Medium Term Expenditure Framework is superior to the traditional one-year presentation of the public sector budget. (b) What are the pre-requisite

Source documents of an accounting system, Source documents of an accounting...

Source documents of an accounting system: Source documents are those documents that identify the particular transaction that is being recorded.  They act as an internal control

What is the financial leverage effect and what causes it, What is the finan...

What is the financial leverage effect and what causes it?  What are the potential benefits and negative consequences of high financial leverage? Monetary leverage is the additi

Definition of hedge fund, Definition The term "Hedge Fund" is a colloqu...

Definition The term "Hedge Fund" is a colloquialism derived from the expression "to Hedge one's bets", which means to limit the possibility of loss on a speculation by betting

Cost of debt, Cost of Debt (k ) : This describes the rate of interest paya...

Cost of Debt (k ) : This describes the rate of interest payable on debt.  The cost of debt funds may be calculated when the debt is redeemable or irredeemable. therefore, when deb

Control ratios, Control ratios: Three important ratios are usually used by...

Control ratios: Three important ratios are usually used by the management to find out whether the variations from budgeted results are unfavorable or favorable.  These ratios are

Explain and discuss the hedging strategies using futures, Question: (a)...

Question: (a) Explain and discuss the hedging strategies using futures (b) Boeing (an American company) delivered on 1st September 2008 an airplane to a Canadian company.

Regular payback period, The director of capital budgeting for a firm has re...

The director of capital budgeting for a firm has recognized two mutually exclusive projects, A and B, with the following expected net cash flows:

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