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Commercial refrigeration systems. The role of maintenance in energy saving in commercial refrigeration was the topic of an article in the Journal of Quality in Maintenance Engineering (Vol. 18, 2012). The authors provided the following illustration of data relating the efficiency (relative performance) of a refrigeration system to the fraction of total charges for cooling the system required for optimal performance. Based on the data shown in the graph (next page), hypothesize an appropriate model for relative performance (y) as a function of fraction of charge (x). What is the hypothesized sign (positive or negative) of the β2parameter in the model?

Short Answer

Expert verified

The appropriate model for the scatterplot above is a quadratic model of y on x.

The sign of β2will be positive as it can be seen in the graph that the parabola is an upward-sloping curve.

Step by step solution

01

model for the fitted data

The second-order model equation for the fitted data isy=β0+β1x+β2x2

02

Sign of β2

The sign of β2will be positive as it can be seen in the graph that the parabola is an upward-sloping curve.

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Most popular questions from this chapter

Question: Cooling method for gas turbines. Refer to the Journal of Engineering for Gas Turbines and Power (January 2005) study of a high-pressure inlet fogging method for a gas turbine engine, Exercise 12.19 (p. 726). Consider a model for heat rate (kilojoules per kilowatt per hour) of a gas turbine as a function of cycle speed (revolutions per minute) and cycle pressure ratio. The data are saved in the file.

a. Write a complete second-order model for heat rate (y).

b. Give the null and alternative hypotheses for determining whether the curvature terms in the complete second-order model are statistically useful for predicting heat rate (y).

c. For the test in part b, identify the complete and reduced model.

d. The complete and reduced models were fit and compared using SPSS. A summary of the results are shown in the accompanying SPSS printout. Locate the value of the test statistic on the printout.

e. Find the rejection region for α = .10 and locate the p-value of the test on the printout.

f. State the conclusion in the words of the problem.


Question: Company donations to charity. The amount a company donates to a charitable organization is often restricted by financial inflexibility at the firm. One measure of financial inflexibility is the ratio of restricted assets to total firm assets. A study published in the Journal of Management Accounting Research (Vol. 27, 2015) investigated the link between donation amount and this ratio. Data were collected on donations to 115,333 charities over a recent 10-year period, resulting in a sample of 419,225 firm-years. The researchers fit the quadratic model,E(y)=β0+β1x+β2x2, where y = natural logarithm of total donations to charity by a firm in a year and x = ratio of restricted assets to the firm’s total assets in the previous year. [Note: This model is a simplified version of the actual model fit by the researchers.]

  1. The researchers’ theory is that as a firm’s restricted assets increase, donations will initially increase. However, there is a point at which donations will not only diminish, but also decline as restricted assets increase. How should the researchers use the model to test this theory?
  2. The results of the multiple regression are shown in the table below. Use this information to test the researchers’ theory at. What do you conclude?

Consider fitting the multiple regression model

E(y)= β0+β1x1+ β2x2+β3x3+ β4x4 +β5x5

A matrix of correlations for all pairs of independent variables is given below. Do you detect a multicollinearity problem? Explain


Question: Manipulating rates of return with stock splits. Some firms have been accused of using stock splits to manipulate their stock prices before being acquired by another firm. An article in Financial Management (Winter 2008) investigated the impact of stock splits on long-run stock performance for acquiring firms. A simplified version of the model fit by the researchers follows:

E(y)=β0+β1x1+β2x2+β3x1x2

where

y = Firm’s 3-year buy-and-hold return rate (%)

x1 = {1 if stock split prior to acquisition, 0 if not}

x2 = {1 if firm’s discretionary accrual is high, 0 if discretionary accrual is low}

a. In terms of the β’s in the model, what is the mean buy and- hold return rate (BAR) for a firm with no stock split and a high discretionary accrual (DA)?

b. In terms of the β’s in the model, what is the mean BAR for a firm with no stock split and a low DA?

c. For firms with no stock split, find the difference between the mean BAR for firms with high and low DA. (Hint: Use your answers to parts a and b.)

d. Repeat part c for firms with a stock split.

e. Note that the differences, parts c and d, are not the same. Explain why this illustrates the notion of interaction between x1 and x2.

f. A test for H0: β3 = 0 yielded a p-value of 0.027. Using α = .05, interpret this result.

g. The researchers reported that the estimated values of both β2 and β3 are negative. Consequently, they conclude that “high-DA acquirers perform worse compared with low-DA acquirers. Moreover, the underperformance is even greater if high-DA acquirers have a stock split before acquisition.” Do you agree?

Suppose you fit the quadratic model E(y)=β0+β1x+β2x2to a set of n = 20 data points and found R2=0.91, SSyy=29.94, and SSE = 2.63.

a. Is there sufficient evidence to indicate that the model contributes information for predicting y? Test using a = .05.

b. What null and alternative hypotheses would you test to determine whether upward curvature exists?

c. What null and alternative hypotheses would you test to determine whether downward curvature exists?

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