30 October 2006 G601, Indiana University Professor Rasmusen, erasmuse@indiana.edu Http://www.rasmusen.org/g601/tasks/ps-regression.txt Due: December 7 REGRESSION ASSIGNMENT For this assignment, you will run a regression, present it as a table, and explain it. Include a titlepage. 1. Using Compustat, pick an industry and sample at least 30 firms from it. Tell me how you chose your sample. 2. Choose a measure of profitability and 4 variables that might explain it. One (and only one) of the variables should be a dummy variable. I will not be commenting on how sensible your variables are, so you can be fairly arbitrary. 3. You will run several specifications of the regression equation. A. Regress profit on the 4 variables and a constant. B. Regress profit on 3 of those variables and a constant. C. Regress Log(Profit) on the log of one of the continuous variables, on the dummy variable, and on a constant. 4. Show your results in a table with one column for each specification. 5. Explain what the size of each coefficient means in specifications A and C, ignoring statistical significance. Your explanations should be something like, "Regression A says that if the ratio of inventories to assets increases by .1 then the return on equity rises by .02," or "Regression A says that if the ratio of inventories to assets increases by 10% then the return on equity falls by 3%." Email me your latex and pdf files as attachments.