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
If an optimal capital structure exists, what are the reasons why too little debt is as undesirable as is too much debt? Too little debt may be as unwanted as too much debt for

It is not easy to determine the theoretical value of non-treasury securities. However, we can use the treasury spot rate for the valuation of non-treasury security.

What kinds of U.S. companies would benefit most from a stronger dollar in the foreign exchange market?  Explain. U.S. companies that import merchandise from other countries wou

The issuer's right to call back the issue before the maturity date is referred to as a "call provision". In case of asset-backed securities, the trustee is grante

For a given IOS and MCC, how do financial managers decide which proposed capital budgeting projects to accept, and which to reject? For a given MCC and IOS, all independent pro

Describe the general pattern of cash flows from a bond with a positive coupon rate. Cash flows as of a bond with a positive coupon rate consist of periodic interest payments an

Keys Printing plans to issue a $1,000 par value, 10-year noncallable bond with a 5.00% coupon, paid semiannually. It should sell at par. The company''s marginal tax rate is 40.00%

Question: (a) Describe the main elements of Working capital management? (b) Belle Rive Ltd Belle Rive Ltd has an annual turnover of Rs 60 million of which 80% is on cr

When a company issues new securities, how do flotation costs affect the cost of raising that capital? While a company issues new securities flotation costs raise the cost of rais

Explain how exchange rate fluctuations influence the return from a foreign market measured in dollar terms. Discuss the empirical proof on the effect of exchange rate doubt on the