Dummy Dependent Variable Models Quiz

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Match the following regression models with their characteristics:

Probit regression model = Dependent variable is a binary variable Logit regression model = Predicted values are between 0 and 1 Linear regression model = Predicted values can be any real number Logistic regression model = Uses the logistic function for predictions

Match the following terms with their meanings:

Cumulative logistic distribution = Used in logit models for cumulative probabilities Pecking order hypothesis = Corporations should use cheapest financing methods first Asymptotes = 0 and 1 are asymptotes in logistic regression models Exponential function = Used in logit models to calculate probabilities

Match the following researchers with their study topic:

Helwege and Liang = Study of the pecking order hypothesis Myers = 'Pecking order hypothesis' proposer Probit and Logit models = Nonlinear regression models for binary variables Firm financing theory = Suggests using cheapest financing sources first

Match the following decision rules with their corresponding descriptions:

If d < dL = There probably is evidence of positive autocorrelation. If d > dU = There probably is no evidence of positive autocorrelation. If dL < d < dU = No definite conclusion about positive autocorrelation may be made. If 4-dL < d < 4 = There probably is evidence of negative autocorrelation. Signup and view all the answers

Match the following ranges of d values with their interpretations:

0 ≤ d < dL = Positive autocorrelation likely. dU < d < 4 = Negative autocorrelation likely. 4-dU < d < 4-dL = No definite conclusion about negative autocorrelation. 2 = No evidence of positive or negative (first-order) autocorrelation. Signup and view all the answers

Match the following limits with their definitions:

dL = Lower limit established for detecting autocorrelation. dU = Upper limit established for detecting autocorrelation. 0 = The minimum value the d statistic can take. 4 = The maximum value the d statistic can take. Signup and view all the answers

Match the following statements with their correct descriptions:

Closer to 0 = Greater evidence of positive autocorrelation. Closer to 4 = Greater evidence of negative autocorrelation. dU < d < 4-dU = No definite conclusion about positive or negative autocorrelation. 4-dU< d < 4-dL = No definite conclusion about negative autocorrelation. Signup and view all the answers

Match the following terms with their definitions:

Explained Sum of Squares (ESS) = Sum of squares explained by the chosen model Residual Sum of Squares (RSS) = Sum of squares not explained by the model Total Sum of Squares (TSS) = The total sum of squares in the data set Degrees of Freedom (df) = Number of independent values that can vary in the calculation of a statistic Signup and view all the answers

Match the following statistics with their descriptions:

R-square = Proportion of the variance in the dependent variable that is predictable from the independent variables Adj R-square = Adjusted R-square value that penalizes excessive use of independent variables in regression models Root MSE = Root Mean Square Error, a measure of the differences between values predicted by a model and the actual values F-statistic = A ratio indicating whether there is a significant relationship between dependent and independent variables in regression analysis Signup and view all the answers

Match the following terms with their meanings:

ANOVA = Analysis of Variance, a statistical method used to analyze differences among group means Regression Coefficients = Values that represent the change in the dependent variable for a one-unit change in the independent variable Hypothesis Testing = Statistical method to make inferences about a population based on sample data Confidence Interval = Range of values within which the true population parameter is likely to fall Signup and view all the answers

Match the following concepts with their explanations:

Model Residual = The difference between observed and predicted values in a regression model Overall Significance Test = Test to determine if all slope coefficients are simultaneously equal to zero in a regression model Observed Data Points = Actual data values collected from observations or experiments Mean Squared Error (Ms) = Average of squared differences between predicted and actual values in a regression model Signup and view all the answers

Match the following concepts with their description:

Fitted values from regression = Estimated probabilities for yi = 1 for each observation i Slope estimates in linear probability model = Change in the probability that the dependent variable will equal 1 for a one-unit change in a given explanatory variable Truncation in the model = Resulting in too many observations with estimated probabilities being exactly zero or one Logit or probit model = Usually used for binary dependent variables instead of linear probability model Signup and view all the answers

Match the following variables with their interpretation:

Market capitalisation (x2i) = Measured in millions of dollars Coefficient -0.3 in the model = Constant term in the probability estimation Coefficient 0.012 in the model = Effect on probability of dividend payment per unit change in market capitalisation Probability of dividend payment = Modeled as a function of market capitalisation in the example Signup and view all the answers

Match the following statements with their implication:

Many estimated probabilities are exactly zero or one = Result of process of truncation Firm's probability of paying a dividend is not exactly zero or one = Reason why linear probability model is not adequate Different kind of model needed for binary dependent variables = Use of logit or probit specification Small firms vs. large firms dividend payment certainty = Uncertainty regarding definite dividend payment based on firm size Signup and view all the answers

Match the probability model with its description:

Linear Probability Model (LPM) = Simplest way of dealing with binary dependent variables Logit Model = Probability model based on logistic function Probit Model = Probability model based on cumulative distribution function Tobit Model = Model used for censored regression Signup and view all the answers

Match the approach with its description:

Linear Probability Model (LPM) = Can be estimated by ordinary least squares (OLS) Logit Model = Model for binary response based on logistic function Probit Model = Model for binary response based on cumulative distribution function Tobit Model = Model used when dependent variable has a censoring point Signup and view all the answers

Match the variable with its role in the linear probability model:

Pi = Probability of an event occurring Yi = Dependent variable representing outcomes (0s and 1s) x2i, x3i, … xki = Explanatory variables in the model ui = Error term in the model Signup and view all the answers

Match the estimation method with the type of model:

OLS = Used to estimate a linear regression model for binary dependent variables Logit Model = Estimated using maximum likelihood estimation Probit Model = Estimated using maximum likelihood estimation Tobit Model = Estimated using a censored regression approach Signup and view all the answers

Match the linear probability model with its characteristics:

Simplest way of dealing with binary dependent variables = Linear Probability Model (LPM) Based on assumption that Pi is linearly related to explanatory variables = Linear Probability Model (LPM) Utilizes OLS for estimation = Linear Probability Model (LPM) Dependent variable represented by a series of zeros and ones = Linear Probability Model (LPM) Signup and view all the answers

Match the types of variables that can be included in the linear probability model:

Quantitative variables or dummies or both = Explanatory variables in the model Binary dependent variables only = Continuous dependent variables only = Categorical variables only = Signup and view all the answers