Partial correlation coefficients , Financial Management

In multiple correlation equations we are often interested in finding out how much of the variation in the dependent variable is explained by one independent variable if all the other independent variables are kept constant.

For example in the equation Y = a + b1 X1 + b2 X2 we may want to find out how much variation in Y is explained by X1 if X2 is kept constant. This is given by the partial coefficient of determination. Using our simplified subscripts the partial correlation coefficient is given by R12.3.

where,   R12.3 =  962_partial correlation coefficient.png

is the partial correlation coefficient between Y and X1 when X2 is kept constant. Note that here there are two subscripts 1 and 2 before the dot unlike the single subscript before the dot in the multiple correlation coefficient discussed earlier. In fact if r13 and r23 are zero R12.3 reduces to r12, the simple correlation coefficient between Y and X1.

Posted Date: 9/17/2012 2:10:39 AM | Location : United States







Related Discussions:- Partial correlation coefficients , Assignment Help, Ask Question on Partial correlation coefficients , Get Answer, Expert's Help, Partial correlation coefficients Discussions

Write discussion on Partial correlation coefficients
Your posts are moderated
Related Questions
Do you provide assignment help on the topic Use of Derivatives in Equity Portfolio Management?

STEPS IN BUDGETARY CONTROL 1. Quantification of plans in relation to sales, production, distribution and finance in terms of objectives and goals set by the management. That i

Corrective Action: Once budget figures are compared with those actually achieved, and a variance analysis carried out, management can then take steps to correct any problems id

Under what circumstances is a warrant's value high ?  Explain. A warrant's value would be elevated when the stock price, time to expiration, and/or expected stock price volatil

Portfolio Diversification The objectives of diversification are to: Reduce the variability of the fund's total return; Reduce the exposure to any single component of t

Foreign Exchange Rates The proportional value of one currency to other, used to exchange currency from one denomination to another.  For example, one British pound is wort

Types of Efficiency    Efficient market theory can be described in three ways: 1) Allocative Efficiency: A market is allocatively proficient when it directs savings tow

1. Increasing the number of indirect-cost pools is guaranteed to sizably increase the accuracy of product or service costs.do you agree? Support your anser using examples 2. The

Explain Zero coupon bonds The bonds that are sold at a discount from face value and do not pay any coupon interest over their life are known as Zero coupon bonds. At maturity t

a) The combined two-firm concentration ratio of Motorola (approximately 17.5%) and Nokia (35%) is around 52.5% of the market. b) Up to 2 marks for correct definition: Market sha