[SOLVED] AFE6014-B – Empirical Methods in Accounting and Finance Tutorial 7

AFE6014-B – Empirical Methods in Accounting and Finance

Tutorial 7 notes

1. Purpose

Know how to use EViews 12 to conduct panel data analysis.

2. Research question

Investigate the impact of a firm’s CEO age (“CEOAGE”) on a firm’s cash holding level (“CASH”)

3. Data and variables

Excel file: Data_Firms Cash Holding Level

Variables: cash ceoage firmsize leverage roa

4. Descriptive statistics

Quick—-Group statistics— descriptive statistics— common sample (try individual sample)

5. Correlation matrix

View—Covariance Analysis

Covariance Analysis: Ordinary

Date:  XXX   Time: XXX

Sample: 2009 2012

Included observations: 107

6. Graph    (Relation between Cash and each independent variables)

View—Graph—Graph Options—Graph type: Specific: Scatter

Details:

Fit lines: Regression Line

Multiple series: Multiple graphs – First vs. All – click OK

7. Pooled OLS

Object—New Object — Equation — Name for object: OLS – click OK

Key in the following variables in Equation specification:

cash c ceoage firmsize leverage roa year03 year04 year05 year06 year07 year08 year09 year10 year11 year12 year13 year14

Estimation settings:

Method: LS – Least Squares (NLS and ARMA)

Dependent Variable: CASH

Method: Panel Least Squares

Date: XXX   Time: XXX

Sample: 2003 2015

Periods included: 13

Cross-sections included: 18

Total panel (unbalanced) observations: 107

8. Residual checks

View — Actual,Fitted,Residual — Actual,Fitted,Residual Table

View — Actual,Fitted,Residual — Actual,Fitted,Residual Graph

View — Actual,Fitted,Residual — Residual Graph

9. Residual Diagnostics tests for OLS

Normality

View —-  Residual Diagnostics ——- Histogram – Normality Test

Serial Correlation

View —-  Residual Diagnostics ——- Serial Correlation LM Test, try different lag 1,2,3 …

Breusch-Godfrey Serial Correlation LM Test:

Null hypothesis: No serial correlation at up to 1 lag

Breusch-Godfrey Serial Correlation LM Test:

Null hypothesis: No serial correlation at up to 2 lags

Heteroskedasticity

View —-  Residual Diagnostics ——- Heteroskedasticity Tests, Test type: White, untick Include White cross terms

Heteroskedasticity Test: White

Null hypothesis: Homoskedasticity

View —-  Residual Diagnostics ——- Heteroskedasticity Tests, Test type: Breusch-Pagan- Godfrey

Heteroskedasticity Test: Breusch-Pagan-Godfrey

Null hypothesis: Homoskedasticity

10. Coefficient Diagnostics tests for OLS

Multicollinearity

View —-  Coefficient Diagnostics ——- Variance Inflation Factors

Variance Inflation Factors

Date: 11/01/22   Time: 00:10

Sample: 1 107

Included observations: 107

11. Interpretation, analysis and discussion

Is this a reliable regression fit? i.e. the OLS output in Step 7 above