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# Econometrics Problem

Table 3-6 gives data on X (net profits after tax in U.S. manufacturing industries [\$, in millions]) and Y (cash dividend paid quarterly in manufacturing industries [\$, in millions]) for years 1974 to 1986.

a. What relationship, if any, do you expect between cash dividend and after-tax profits?
b. Plot the scattergram between Y and X.
c. Does the scattergram support your expectations in part (a)?
d. If so, do an OLS regression of Y on X and obtain the usual statistics.
e. Establish a 99% confidence interval for the true slope and test the hypothesis that the true slope coefficient is zero; that is, there is no relationship between dividend and the after-tax profit.

TABLE 3-6 CASH DIVIDEND (Y) AND AFTER-TAX PROFITS (X) IN U.S. MANUFACTURING INDUSTRIES, 1974-1986
Year Y X
\$ in millions
1974 19,467 58,747
1975 19,968 49,135
1976 22,763 64,519
1977 26,585 70,366
1978 28,932 81,148
1979 32,491 98,698
1980 36,495 92,579
1981 40,317 101,302
1982 41,259 71,028
1983 41,624 85,834
1984 45,102 107,648
1985 45,517 87,648
1986 46,044 83,121

#### Solution Summary

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