1. I have a multiple regression equation where log(salary) = b0 + b1(ceotenure). What is the purpose of putting the dependent variable in logarithmic form? How would you interpret the change in y for a 1 unit increase in ceotenure?

  2. For this multiple regression equation, what are the unit measurements for RMSE?

  3. I have a second multiple regression equation where salary = b0 + ln(sales) + ln(marketvalue). How does the fact that the independent variables are now in natural logarithmic form change the interpretation of a 1 unit increase in x leads to a ____ change in y?

  4. I am asked to add profits to this second equation. It asks why this variable cannot be included in logarithmic form? I have no idea.


closed as off-topic by Firebug, Peter Flom - Reinstate Monica May 2 '17 at 19:42

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "Self-study questions (including textbook exercises, old exam papers, and homework) that seek to understand the concepts are welcome, but those that demand a solution need to indicate clearly at what step help or advice are needed. For help writing a good self-study question, please visit the meta pages." – Firebug, Peter Flom - Reinstate Monica
If this question can be reworded to fit the rules in the help center, please edit the question.

  1. You would use this model under the assumption that "salary" increases exponentially with "ceotenure". The log-linear form captures this relationship. For a 1 unit increase in "ceotenure", the salary changes by a multiplicative factor of $e^{b1}$.

  2. I think it should be the same unit as the dependent variable, so probably "log-dollars".

  3. b1*ln(sales) changes to b1*ln(sales+1), and this isn't free from the current level of sales, so an interpretation of the regression coefficient is not easy here.

  4. Profits may be negative. (Loss!)

  • $\begingroup$ A unit increase in $\ln(\text{sales})$ is the same as multiplying $\text{sales}$ by $e$. More typically we'd examine the effect of say a $1\%$ or $10\%$ increase in sales ($\ln(sales) + \ln(1.01)$ for the log variable, for example) as being more interpretable. $\endgroup$ – Glen_b Jun 28 '14 at 4:47

Not the answer you're looking for? Browse other questions tagged or ask your own question.