Question

Need to complete parts a,b,c, d asap.

POSluy Batlve of as many of the B's in the model, part a, as possible. 12.74 Buy-side vs. sell-side analysts' earnings forecasts. Refer to the Financial Analysts Jounal (July/August 2008) compari- son of earnings forecasts of buy-side and sell-side analysts, Exercise 2.86 (p. 88). The Harvard Business School profes- sors used regression to model the relative optimism (y) of the analysts' 3-month horizon forecasts. One of the independent variables used to model forecast optimism was the dummy variable (1 if the analyst worked for a buy-side firm, 0 if the analyst worked for a sell-side firm). a. Write the equation of the model for E(y) as a function of type of firm. b. Interpret the value of ßo in the model, part a. c. The professors write that the value of Bi in the model, part a, "represents the mean difference in relative fore- cast optimism between buy-side and sell-side analysts Do you agree? 732 > d. The professors also argue that "if buy-side analysts make less optimistic forecasts than their sell-side coun- terparts, the [estimated value of Bı] will be negative." Do you agree?

Answer 1

Answer:-

given that y = 3 months

forecast optimism was the dummy variable = 1

(a) here we need to write an equation of the model for E(y)

it is a function of a type of a firm.

here the equation is

$E(y)=\beta_{0}+\beta_{1}x_{1}+\beta_{2}x_{2}+\beta_{3}x_{3}$

where $\beta$ is the qualitative and quantitative variables.

x are the analysts worked or natural logarithm

(b) here we need to interpret $\beta_{0}$ in the model of part(a)

then we already know that the elements of the global test is

$\beta_{0}=\beta_{1} = \beta_{2} = \beta_{3}$

where  $\beta_{0}\neq 0$

that must be in a positive terms.

(c) the professor write the value of   in the model part(a) represents the mean difference in the relative force cast optimism between buy side and sell side analysts .

61

according to the test static n = 11,121.

where t = 4.3

but the test do not follow null hypothesis and then it determine the slope

61

hence
31メ0

i do not agree with the professor.

(d) we don't concur with the educator end in the wake of controlling for figure skyline and investigator experience profit conjectures by the examiners at purchase side firms are more idealistic than estimate made by experts at sell side firms in light of the fact that the littlest estimation of coefficient of assurance R^2 and the end to some extent (c) don't concur with professor end.

THANK YOU