Question

Question 10 (5 points) Question 3(A): We predict market Direction (Up/Down) on the basis of Lag! (%return for previous week) and Lag2 (%return for 2 weeks previous) The following Logistic Regression Model was obtained by creating a dummy variable of 1 for Direction being Up The model coefficient estimates and corresponding p-values are provided below: Direction -0.211 -0.054 Lag! +0.054 . Lag 2 (0.0) (0.05) (0.05) Compute the predicted probability of Direction being Up for the given two values of Lag! and Lag2 Lagi - 4.448 and Lag2 -6.76 Choose the correct answer from below. 0.3358 0.5832 0.8162 0.6934

Answer 1

*We are only supposed to answer one question*

Question 10

We will use the predicted possibility of regression using the logistics regression given above-

Direction = 0.211 - (0.054*(-4.448)) + (0.054*6.76)

= 0.8162

Hence, Option C is the answer.