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Multiple Regression & Correlation Analysis of Investments

Variables
Dependent Variable
Investments ()

Independent Variables
Government Investments (X1) Other Investments (X2)

General Multiple Regression Equation


= a+b1X1+b2X2 Investment=Constant+b1Government Investments+b2Other Investments =1.131+1X1+1X2

Correlations (5 Years)
Investments Government Other Investments Investments
Pearson Investments Correlation Government Investments Other Investments 1.000 0.953 0.913 0.953 1.000 0.747 0.913 0.747 1.000

Investment
Government Investment Other Investment

Government Investments
Investments Other Investments

Other Investments
Investments Government Investments

Model Summarya
Model 1 R 1.000a R Square 1.000 Adjusted R Square 1.000 Std. Error of the Estimate 0.671

a. Predictors: (Constant), 5 years other investments, 5 years government investments

R
Measures the strength of the linear relationship between variables. Here R is 1.00. Direct or positive association between the variables.

R Square
Here R square is 1.00 (strong association). We can say that independent variables can influence the dependent variable by 100%.

Std. Error of the Estimate


We expect 68% will be within 0.671, About 95% will be within 1.342 About 99% of the residuals will be within 2.013.

Global Test
Critical value of F is 19 (From appendix B.4)

H0: 1= 2= 0

H1: Not all the is are 0

Decision Rule: When Fc > 19, H0 should be rejected.

ANOVAb
Model 1 Regression Sum of Squares 7.013E7 df 2 Mean Square 3.506E7 F Sig. 0.000a

7.795E7

Residual 0.900 2 0.450 Total 7.013E7 4 a. Predictors: (Constant), 5 years other investments, 5 years government investments b. Dependent Variable: 5 years investments

Evaluating Individual Regression Coefficients


Other Investments
H0: 1= 0 H1: 1 0

H0: 1= 0
H1:1 0

t is 4.303 (From appendix B.2).

Decision Rule
Reject H0 if -4.303 > t > 4.303.

Government Investments

Critical value of t

Model

(Constant)
Government Investments Other Investments

Coefficientsa (5 Years) Unstandardized Standardized Coefficients Coefficients B Std. Error Beta 1.131 1.053 1.000 1.000 0.000 0.000

Sig.

1.074 0.612 5.087E3


0.456 3.786E3

0.395
0.000 0.000

a. Dependent Variable: 5 years investments

New Regression Equation

= a+b1X1 Investment= Constant+b1Government Investments =1.131+1X1

Multicollinerity
Coefficient Correlationsa(5 Years) Model Other Government Investments Investments 1 Correlati Other Investments 1.000 -0.747 ons Government Investments -0.747 1.000 a. Dependent Variable: 5 years investments

General Rule: Correlation between two independent variables within 0.70 (no problem of using the independent variables).

Correlation exceeds the range

There is multicollinearity

Chance of providing incorrect results in the hypothesis tests for individual independent variables.

Multiple Regression & Correlation Analysis of EAT

Variables:
Independent Variables
Operating Income (X1) Operating Expense(X2)

Dependent variables

Earnings After Tax ()

Regression Equation:
= a+ b 1 X 1 + b 2 X 2

EAT= Constant + b 1 Operating Income+b 2 Operating Expense


= 398.126 + 0.524 X 1 -0.659 X 2 Intercept a=398.126

b1= 0.524 EAT will increase by 0.524 Million, regardless of the operating expense.

b2= -0.659 EAT will decrease by 0.659 Million, regardless of the operating income.

EAT is 398.126 Million when operating income and operating expense is zero

Correlation:
EAT
Pearson Operating Correlation Income Operating Expense EAT 1.000 .966 .700 Operating Income .966 1.000 .848 Operating Expense .700 .848 1.000

Positive and strong correlation with Operating Income and Positive but less strong correlation with Operating Expense.

Operating Income
Positive and strong correlation with EAT and Operating Expense

Positive but less strong correlation with EAT Strong positive correlation with Operating Income.

EAT

Operating Expense

Model Summary:
Model R Adjusted Std. Error of the R Square R Square Estimate

.993a

.985

.971

215.693

R is 0.993 which is quiet near to 1. Direct or positive association between the variables

Operating income and operating expense can explain 98.5% variation in dependent variable EAT

68% of the residuals will be within 215.693 95% of the residuals will be within 431.386 and 99% of the residuals will be within 647.079

R Square

Std. Error of Estimate

Global Test:

Hypothesis: H 0 : 1 = 2 = 0 H 1 : Not all the i s are 0

Critical value: Critical value of F is 19. Decision Rule: Reject H 0 if (F c > 19), calculated value of F is greater than 19.
ANOVA Model 1 Residual

Sum of Squares
93046.560

df 2 2

Mean Square 46523.280

Sig.

Regression 6251884.240

3125942.120 67.191 .015a

Total

6344930.800

Individual Test Of Hypothesis

For Operating Income: H 1 : 1 0

H0 : 1= 0

For Operating Expense: H 1 : 2 0

H0 : 2= 0

Critical value: Critical value of t is 4.303 Decision Rule: Reject H 0 if t c < -4.303 or t c > 4.303 Unstandardized Coefficients Standardized Coefficients

Model (Constant) Operating Income 1 Operating Expense

B
398.126 .524 -.659

Std. Error 311.857 .064 .249

t 1.277

Sig. .330 .014 .118

Beta

1.330 -.428

8.221 -2.647

New Regression Equation


= a+ b 1 X 1

EAT= Constant + b 1Operating Income = 398.126 + 0.524 X 1

Multicollinearity
Model
Correlations Operating Expense 1.000 -.848 Operating Income -.848 1.000

Operating Expense
Operating Income

General Rule
No problem with using variable having correlation between 0.70 and +.70

Test Result

Correlation between operating income and operating expense is -0.848.

Multicollinearity Exist

Multiple Regression & Correlation Analysis of Loans and Advances

Variables
Independent variable Total Loans and advances Dependent Variable()

Loans, cash credits (X1)

Bills purchased (X2) Independent variable

Regression Equation:
= a+ b 1 X 1 + b 2 X 2
Total loans and advances= Constant+b 1 cash credits+ b 2 Bills Purchased = -205.375+ 1.042 X 1 +0.039 X 2 Loans

Intercept a = -205.375 Total loans and advances is tk.205.375 when loans, cash credits and bills purchased is zero.

b1= 1.042 Total loans and advances would increase per million by 1.042, regardless of the bills purchased

b2= 0.039 Total loans and advances would increase per 0.039, regardless of the loans, cash credits

Correlations
Total loans Loans Cash and advances credits Bills purchased -.521 -.530

Pearson Total loans Correlation and advances


Loans Cash credits

1.000 1.000

1.000 1.000

Bills purchased
Total loans

-.521
Loans cash credits
There is a positive and strong relationship with total loans and advances. There is a positive but less strong relationship with bills purchased

-.530

1.000
Bills purchased

There is a positive and strong relationship with loans, cash credits and negative relationship with bills purchased.

There is a negative relationship with both total loans advances and loans, cash credits.

Model Summary
Model 1 R 1.000a R Square 1.000 Adjusted R Square 1.000 Std. Error of the Estimate 385.10153

a. Predictors: (Constant), Bills purchased; Loans, Cash credits

R square
Here R square is 1.00 which indicates that there are strong association between the variables

Std. error of estimate


68% residuals will be between 385.105, 95 %residuals will be between 770.203 99 % residuals will be between 1155.304

Here R is 01.00. It indicates that there is a direct or positive association between the variables.

Global Test: Testing the Multiple Regression Model

Hypothesis: H 0 : 1 = 2 = 0

H 1 : Not all the i s are 0


Critical value : of F is 19. Decision Rule: Reject H 0 if (F c > 19), calculated value of F is greater than 19.

ANOVA
Model Sum of Squares df Mean Square F Sig.

1 Regression

2.693E9

1.346E9 9.078E3

.000a

Residual
Total

296606.375
2.693E9

2
4

148303.187

Individual Test Of Hypothesis

For Loans, cash credits H 0 : 1 =0 H 1 : 1 0

For bills purchased

H 0: 2= 0

H 1: 2 0

Critical value: Critical value of t is 4.303 Decision Rule: Reject H 0 if t c < -4.303 or t c > 4.303

Model (Constant) Loans Cash 1 credits Bills purchased

Un standardized Coefficients B -205.375 Std. Error 649.868

Standardized Coefficients Beta

Sig.

-.316

.782

1.042
.039

.009
.028

1.006
.012

115.008
1.377

.000
.302

New Regression Equation


= a+b 1 X 1 Total loans and advances= Constant+b 1 loans, cash credit =-205.375+1.042X 1

Multicollinearity
Model Bills purchased Correlations Loans Cash credits Bills Loans and purchased cash credits 1.000 .530 .530 1.000

General Rule

No problem with using variable having correlation between 0.70 and +.70

Test Result

Correlation between Bills purchased and loans Cash credits is .530. Multicollinearity does not exist.

Multiple Regression & Correlation Analysis of Income

Variables
Dependent variables: Dependent variables: Total income, represented by Independent variables: Other income, represented by X1 Commission, exchange &brokerage, represented by X2 Investment income, represented by X3 come, represented by Independent variables: Other income, represented by X1

Regression Equation

= a+ b1 X1+ b2 X2+ b3 X3 Total income= b1 Investment income + b2 Commission, exchange & brokerage+ b3 other income = -152.335 -3.238 X1 +6.219 X2+4.028 X3

Correlation:
Total Investment Commission Other Income Income Exchange& Income Brokerage Total income Investment income 1.000 0.588 0.840 -0.243

Pearson Correlation Commission , exchange& brokerage Other income

0.588
0.840 -0.243

1.000
0.928 -0.801

0.928
1.000 -0.654

-0.801
-0.654 1.000

Model Summary
Model Summary Model
1

R
0.988a

R Square
0.975

Adjusted R Square
0.901

Std. Error of the Estimate


597.12121

a. Predictors: (Constant), Other income, commission, exchange & brokerage, Investment income

Global Test
H0: 1= 2= 3= 0 H1: Not all the is are 0 Critical value: Critical value of F is 216. Decision Rule: Reject H0 if (Fc > 216), calculated value of F is greater than 216.

Model Regression 1 Residual Total

Sum of Squares 1.409E7 356553.74 0 1.445E7

ANOVA df
3 1 4

Mean Square 4696202. 487 356553.7 40

F 13.171

Sig. 0.199a

Individual Hypothesis Test


Coefficientsa Model Unstandardized Coefficients Standardiz ed Coefficients Beta t Sig.

B 1 (Constant)
Investment income Commission, exchange & brokerage Other income

Std. Error 3324.171


1.561

-152.335
-3.238

-0.046
-1.205 -2.074

0.971
0.286

6.219

1.402

2.042

4.436

0.141

4.028

9.028

0.128

0.446

0.733

a. Dependent Variable: Total income

New Regression Equation


= a+ b1 X1+ b2 X2+ b3 X3
= -152.335 - 3.238 X1 +6.219 X2+4.028 X3

= -152.335 - 3.238 (0) +6.219 (0) +4.028 (0)


= -152.335

Multicollinearity
Coefficient Correlations Model Other income Commission, Correlations exchange& brokerage Other Income 1.000 -0.399 0.687 81.505 -5.044 9.686 Commissio n Investment Income Exchange & Brokerage -0.399 0.687 1.000 -0.892 -5.044 1.965 -1.953 -0.892 1.000 9.686 -1.953 2.438

Investment income
Other income Covariance Commission, exchange& brokerage Investment income

a. Dependent Variable: Total income

Multiple Regression & Correlation Analysis of Deposits

Variables

Dependent variables: Total deposits, represented by

Independent variables:

Current deposits, represented by X 1


Savings Bank deposits, represented by X 2

Fixed deposits, represented by X 3

General Multiple Regression Equation


= a+ b 1 X 1 + b 2 X 2 +b 3 X 3 Total deposits = b 1 current deposits+ b 2

savings bank deposits + b 3 fixed deposits

= -39237.267-6.294X 1 +10.676 X 2 +0.900 X 3

PEARSON CORRELATION
Total Deposits
Current Deposits

Fixed Deposits

Savings Bank Deposits


0.980

Total Deposits Current Deposits Fixed Deposits Savings Bank Deposits

1.000

0.945

0.954

0.945 0.954

1.000 0.916

0.916 1.000

0.975 0.903

0.980

0.975

0.903

1.000

OPINION

In case of total deposits there is a positive and strong relationship with current, savings bank and fixed deposits
In case of current deposits there is a positive and strong relationship with current, savings bank and fixed deposits In case of fixed deposits there is a positive and strong relationship with current, savings bank and fixed deposits In case of savings deposits there is a positive and strong relationship with current, savings bank and fixed deposits

MODEL SUMMARY
Model R R Square Adjusted R Square 0.992 Std. Error of the Estimate 1894.995

0.999a

0.998

Predictors: (Constant), fixed deposit, savings bank deposit, current deposit

GLOBAL TEST (ANOVA)


Model
Regression

Sum of Squares
1.827E9

df
3

Mean Square
6.089E8

F
169.553

Sig.
0.56a

Residual Total

3591005.111 1.830E9

1 4

3591005.111

a. Predictors: (Constant) fixed deposit,

savings bank deposit, current deposit

b. Dependent Variable: Total deposits

H 0: 1= 2= 3 =0 H 1: Not all the is are 0

Decision Rule: Reject H 0 if (F c > 216), calculated value of F is greater than 216.

General Multiple Regression Equation


Coefficients
Model Un standardized Coefficients B 1 (Constant) Current Deposit Savings Bank Deposit -39237.267 -6.294 10.676 Std. Error 7875.027 2.532 1.995 -0.529 1.067 Standardized Coefficients Beta -4.982 -2.486 5.351 0.126 0.244 0.118 t Sig.

Fixed Deposit

0.900

0.211

0.474

4.272

0.146

a. Dependent Variable: total deposits

New Equation:

=a

Total deposits= Constant


=-39237.267

Multicollinerity:
Coefficient Correlations
Model Fixed deposit Savings bank deposit Current deposit

Correlations

Fixed deposit
Savings bank deposit Current deposit

1.000
-0.122 -0.366

-0.122
1.000 -0.855

-0.366
-0.855 1.000

a. Dependent Variable: Total deposits

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