Module 04 Session Long Project Essay

Module 04 Session Long ProjectThe data taken for analysis for this module is from “From Business Week’s analysis of the S&P 500 for 2004”. The Industry Ranking S&P 500 is based on three factors Market Value (MarketValue, MvOneYearTotalReturn, and MvThreeYearTotalReturn), Sales (Sales, SalesChangeFrom2002, and Sales3YrAverageChange) and Profitability (Profitability, ProfitChangeFrom2002, and Profit3YrAverageChange).Descriptive Statistics and Frequency TabulationsTable 1 shows the descriptive statistics of all variables.

From table 1, it can be seen that all the variables are highly positively skewed (i.e. skewed to left) as the value of skewness coefficient is greater than zero for all variables. The positive skewness is also confirmed from the mean, median and mode values. The mean value for all the variables is greater than median values and median values for all the variables are greater than mode values. The Histograms for all the variables confirms positive skewness as the right tail for all the variables are longer.Table 1: Descriptive StatisticsOverallSP500Rank_04MarketValueMvOneYearTotalReturnMvThreeYearTotalReturnSalesSalesChangeFrom2002Sales3YrAverageChangeProfitabilityProfitChangeFrom2002Profit3YrAverageChangeNValid483488479312486408312428264251Missing236231240407233311407291455468Mean245.5621321.

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45957.26751.98413277.49114.8510.

8331115.36693.0925.960Median243.

009251.55045.40036.3506316.

00011.007.200478.

00027.0015.700Mode284021.

5a25.1a8.0a679.6a113.3109.8a9a10.

4Std. Deviation143.50939064.

462050.468151.689523919.941622.12511.27322108.2942288.29335.

9557Skewness.0214.6635.1072.

4035.7939.5862.2365.

1487.5304.457Std. Error of Skewness.

111.111.112.138.111.121.138.

118.150.154Range493325661.2682.8395.4258577.135270.320957.

12834302.4Minimum1867.6.3.1103.90.

02.90.2Maximum494326528.8683.1395.

5258681.035270.320960.

02834302.6a. Multiple modes exist. The smallest value is shownHistogramsScatterplotsThe Scatter plots for MarketValue, MvOneYearTotalReturn, MvThreeYearTotalReturn, Sales and Profitability are drawn against OverallSP500Rank_04. Except for MvOneYearTotalReturn, all other variables show a decreasing linear trend against OverallSP500Rank_04.Correlation matrixTable 2 shows the Correlation matrix of all variables.

The strongest correlation is between variables MarketValue and Profitability. The weakest correlation is between variables ProfitChangeFrom2002 and Profitability. OverallSP500Rank_04 has strongest correlation is with MvThreeYearTotalReturn and weakest correlation with ProfitChangeFrom2002. Most of the correlations for the variables OverallSP500Rank_04 with other variables are significant at 95% significance level (p-value less than 0.

05), except two that are ProfitChangeFrom2002 and Profit3YrAverageChange (p-value greater than 0.05).Table 2: CorrelationsOverallSP500Rank_04MarketValueMvOneYearTotalReturnMvThreeYearTotalReturnSalesSalesChangeFrom2002Sales3YrAverageChangeProfitabilityProfitChangeFrom2002Profit3YrAverageChangeOverallSP500Rank_04Pearson Correlation1.000-.296**.

125**-.329**-.235**-.183**-.305**-.292**-.029.095Sig.

(2-tailed).000.006.000.

000.000.000.000.636.137N483.

000483475309483405312427262249MarketValuePearson Correlation-.296**1.000-.129**-.101.664**.

000-.014.873**.047-.026Sig. (2-tailed).000.005.

074.000.993.

800.000.446.677N483488.000479312486408312428264251MvOneYearTotalReturnPearson Correlation.125**-.129**1.

000.171**-.103*.108*.087-.107*.

049-.031Sig. (2-tailed).006.005.003.025.

030.126.028.431.626N475479479.000308478401307421257245MvThreeYearTotalReturnPearson Correlation-.

329**-.101.171**1.000-.120*.126*.

172*-.109.022-.132Sig.

(2-tailed).000.074.003.035.038.011.060.

773.097N309312308312.000311273220301171160SalesPearson Correlation-.235**.664**-.

103*-.120*1.000-.010.

010.709**.063-.

009Sig. (2-tailed).000.

000.025.035.846.854.000.

305.888N483486478311486.000408312428264251SalesChangeFrom2002Pearson Correlation-.183**.

000.108*.126*-.0101.000.314**-.037-.008-.

016Sig. (2-tailed).000.993.030.038.846.

000.480.910.816N405408401273408408.000300372223210Sales3YrAverageChangePearson Correlation-.305**-.014.

087.172*.010.314**1.000-.

044-.016.022Sig. (2-tailed).

000.800.126.011.

854.000.450.843.788N312312307220312300312.

000295166158ProfitabilityPearson Correlation-.292**.873**-.107*-.

109.709**-.037-.

0441.000-.002.015Sig. (2-tailed).000.000.028.

060.000.480.450.974.821N427428421301428372295428.

000230221ProfitChangeFrom2002Pearson Correlation-.029.047.049.022.063-.

008-.016-.0021.000.031Sig.

(2-tailed).636.446.431.773.

305.910.843.974.669N262264257171264223166230264.

000198Profit3YrAverageChangePearson Correlation.095-.026-.031-.132-.

009-.016.022.015.0311.000Sig. (2-tailed).137.

677.626.097.888.816.788.

821.669N249251245160251210158221198251.000**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).Regression AnalysisThe variables MvThreeYearTotalReturn, Sales3YrAverageChange, MarketValue, and Profitability have the highest correlations with OverallSP500Rank_04.The regression analysis gives a model for predicting dependent variables based on independent variables. The regression analysis gives three types of statistics in SPSS:·         The coefficient of determination, designated as R Square ( R2) that tells the proportion of variance in the dependent variable that can be accounted for by the independent variable.·         An ANOVA table for the regression equation for testing null hypothesis that R2 in the population equals zero, and allows us to decide whether or not the linear model significantly fits the data at the p<.05 level.

·         The output (coefficients for intercepts and slope) that provides the information needed to construct the regression (prediction) equation.1.         Regression: OverallSP500Rank_04 (DV) and MvThreeYearTotalReturn (IV)The regression analysis for OverallSP500Rank_04 (DV) and MvThreeYearTotalReturn (IV) is significant as the sig value in ANOVA table is less than 0.

05. The value of the coefficient of determination 0.108 implies that the MvThreeYearTotalReturn (IV) can account for 10.8% of variance in the OverallSP500Rank_04 (DV).The linear regression equation will be:‘OverallSP500Rank_04 = 240.811 – 0.816(MvThreeYearTotalReturn)Variables Entered/RemovedbModelVariables EnteredVariables RemovedMethod1MvThreeYearTotalReturna.Entera.

All requested variables entered.b. Dependent Variable: OverallSP500Rank_04Model SummaryModelRR SquareAdjusted R SquareStd. Error of the Estimate1.

329a.108.105120.307a.

Predictors: (Constant), MvThreeYearTotalReturnANOVAbModelSum of SquaresdfMean SquareFSig.1Regression539735.1671539735.16737.291.000aResidual4443418.58730714473.

676Total4983153.754308a. Predictors: (Constant), MvThreeYearTotalReturnb. Dependent Variable: OverallSP500Rank_04CoefficientsaModelUnstandardized CoefficientsStandardized CoefficientstSig.BStd. ErrorBeta1(Constant)240.8119.73124.

747.000MvThreeYearTotalReturn-.816.134-.329-6.107.000a. Dependent Variable: OverallSP500Rank_042.

       Regression: OverallSP500Rank_04 (DV) and Sales3YrAverageChange (IV)The regression analysis for OverallSP500Rank_04 (DV) and Sales3YrAverageChange (IV) is significant as the sig value in ANOVA table is less than 0.05. The value of the coefficient of determination 0.093 implies that the Sales3YrAverageChange (IV) can account for 9.3% of variance in the OverallSP500Rank_04 (DV).The linear regression equation will be:‘OverallSP500Rank_04 = 231.106 – 3.527(Sales3YrAverageChange)Variables Entered/RemovedbModelVariables EnteredVariables RemovedMethod1Sales3YrAverageChangea.

Entera. All requested variables entered.b. Dependent Variable: OverallSP500Rank_04Model SummaryModelRR SquareAdjusted R SquareStd. Error of the Estimate1.305a.

093.090124.383a. Predictors: (Constant), Sales3YrAverageChangeANOVAbModelSum of SquaresdfMean SquareFSig.

1Regression491538.1891491538.18931.772.

000aResidual4796012.92731015471.009Total5287551.115311a.

Predictors: (Constant), Sales3YrAverageChangeb. Dependent Variable: OverallSP500Rank_04CoefficientsaModelUnstandardized CoefficientsStandardized CoefficientstSig.BStd. ErrorBeta1(Constant)231.1069.77323.

646.000Sales3YrAverageChange-3.527.626-.305-5.637.000a. Dependent Variable: OverallSP500Rank_043.

       Regression: OverallSP500Rank_04 (DV) and MarketValue (IV)The regression analysis for OverallSP500Rank_04 (DV) and MarketValue is significant as the sig value in ANOVA table is less than 0.05. The value of the coefficient of determination 0.088 implies that the MarketValue can account for 8.

8% of variance in the OverallSP500Rank_04 (DV).The linear regression equation will be:‘OverallSP500Rank_04 = 268.786 – 0.

001(MarketValue)Variables Entered/RemovedbModelVariables EnteredVariables RemovedMethod1MarketValuea.Entera. All requested variables entered.

b. Dependent Variable: OverallSP500Rank_04Model SummaryModelRR SquareAdjusted R SquareStd. Error of the Estimate1.296a.088.086137.

216a. Predictors: (Constant), MarketValueANOVAbModelSum of SquaresdfMean SquareFSig.1Regression870326.

9471870326.94746.224.000aResidual9056401.87748118828.278Total9926728.

824482a. Predictors: (Constant), MarketValueb. Dependent Variable: OverallSP500Rank_04CoefficientsaModelUnstandardized CoefficientsStandardized CoefficientstSig.BStd. ErrorBeta1(Constant)268.

7867.11737.768.

000MarketValue-.001.000-.296-6.799.000a. Dependent Variable: OverallSP500Rank_044.       Regression: OverallSP500Rank_04 (DV) and Profitability (IV)The regression analysis for OverallSP500Rank_04 (DV) and Profitability is significant as the sig value in ANOVA table is less than 0.

05. The value of the coefficient of determination 0.085 implies that the Profitability can account for 8.5% of variance in the OverallSP500Rank_04 (DV).The linear regression equation will be:‘OverallSP500Rank_04 = 239.049 – 0.018(Profitability)Variables Entered/RemovedbModelVariables EnteredVariables RemovedMethod1Profitabilitya.Entera.

All requested variables entered.b. Dependent Variable: OverallSP500Rank_04Model SummaryModelRR SquareAdjusted R SquareStd.

Error of the Estimate1.292a.085.083124.

606a. Predictors: (Constant), ProfitabilityANOVAbModelSum of SquaresdfMean SquareFSig.1Regression612846.2651612846.26539.

470.000aResidual6598854.60142515526.717Total7211700.867426a. Predictors: (Constant), Profitabilityb. Dependent Variable: OverallSP500Rank_04CoefficientsaModelUnstandardized CoefficientsStandardized CoefficientstSig.BStd.

ErrorBeta1(Constant)239.0496.81935.058.000Profitability-.018.

003-.292-6.283.000a.

Dependent Variable: OverallSP500Rank_04Multiple Regression: (Taking four Independent Variables that have highest Correlation with OverallSP500Rank_04)The regression analysis for OverallSP500Rank_04 (DV) and MvThreeYearTotalReturn, Sales3YrAverageChange, MarketValue, and Profitability (IVs) is significant as the sig value in ANOVA table is less than 0.05. The value of the coefficient of determination 0.330 implies that the MvThreeYearTotalReturn, Sales3YrAverageChange, MarketValue, and Profitability (IVs) can account for 33% of variance in the OverallSP500Rank_04 (DV).The linear regression equation will be:‘OverallSP500Rank_04 = 247.781 – 0.

591(MvThreeYearTotalReturn) – 3.329(Sales3YrAverageChange) – 0.013(Profitability)Variables Entered/RemovedbModelVariables EnteredVariables RemovedMethod1Profitability, Sales3YrAverageChange, MvThreeYearTotalReturn, MarketValuea.Entera. All requested variables entered.b. Dependent Variable: OverallSP500Rank_04Model SummaryModelRR SquareAdjusted R SquareStd. Error of the Estimate1.574a.330.31793.252a. Predictors: (Constant), Profitability, Sales3YrAverageChange, MvThreeYearTotalReturn, MarketValueANOVAbModelSum of SquaresdfMean SquareFSig.1Regression894689.6814223672.42025.722.000aResidual1817443.7772098695.903Total2712133.458213a. Predictors: (Constant), Profitability, Sales3YrAverageChange, MvThreeYearTotalReturn, MarketValueb. Dependent Variable: OverallSP500Rank_04CoefficientsaModelUnstandardized CoefficientsStandardized CoefficientstSig.BStd. ErrorBeta1(Constant)247.78111.18122.161.000MvThreeYearTotalReturn-.591.117-.294-5.037.000Sales3YrAverageChange-3.329.542-.353-6.137.000MarketValue.000.000-.116-.838.403Profitability-.013.008-.217-1.563.119a. Dependent Variable: OverallSP500Rank_04We can leave variable MarketValue, as for four variable regression analysis, MarketValue has not significant effect on linear regression equation.Multiple Regression (Taking all Independent Variables)The regression analysis for OverallSP500Rank_04 (DV) and Profit3YrAverageChange, SalesChangeFrom2002, Profitability, MvThreeYearTotalReturn, ProfitChangeFrom2002, Sales3YrAverageChange, MvOneYearTotalReturn, Sales, and MarketValue (IVs)  is significant as the sig value in ANOVA table is less than 0.05. The value of the coefficient of determination 0.502 implies all the independent variables can account for 50.2% of variance in the OverallSP500Rank_04 (DV).Variables Entered/RemovedbModelVariables EnteredVariables RemovedMethod1Profit3YrAverageChange, SalesChangeFrom2002, Profitability, MvThreeYearTotalReturn, ProfitChangeFrom2002, Sales3YrAverageChange, MvOneYearTotalReturn, Sales, MarketValuea.Entera. All requested variables entered.b. Dependent Variable: OverallSP500Rank_04Model SummaryModelRR SquareAdjusted R SquareStd. Error of the Estimate1.708a.502.44084.217a. Predictors: (Constant), Profit3YrAverageChange, SalesChangeFrom2002, Profitability, MvThreeYearTotalReturn, ProfitChangeFrom2002, Sales3YrAverageChange, MvOneYearTotalReturn, Sales, MarketValueANOVAbModelSum of SquaresdfMean SquareFSig.1Regression520912.573957879.1758.161.000aResidual517747.981737092.438Total1038660.55482a. Predictors: (Constant), Profit3YrAverageChange, SalesChangeFrom2002, Profitability, MvThreeYearTotalReturn, ProfitChangeFrom2002, Sales3YrAverageChange, MvOneYearTotalReturn, Sales, MarketValueb. Dependent Variable: OverallSP500Rank_04CoefficientsaModelUnstandardized CoefficientsStandardized CoefficientstSig.BStd. ErrorBeta1(Constant)331.97928.44011.673.000MarketValue.003.002.3241.600.114MvOneYearTotalReturn-.955.402-.228-2.373.020MvThreeYearTotalReturn-.500.170-.285-2.951.004Sales.001.001.2592.244.028SalesChangeFrom2002-.714.756-.090-.944.348Sales3YrAverageChange-4.3771.124-.377-3.896.000Profitability-.135.036-.773-3.703.000ProfitChangeFrom2002-.051.040-.141-1.283.203Profit3YrAverageChange.158.270.051.585.561a. Dependent Variable: OverallSP500Rank_04We can leave variable MarketValue, SalesChangeFrom2002, ProfitChangeFrom2002, and Profit3YrAverageChange as these variables has not significant effect on linear regression equation. 

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