Analytical Methods in Finance and Economics

Running head: ANALYTICAL METHODS IN FINANCE AND ECONOMICS
Analytical Methods in Finance and Economics
Name of the Student
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1ANALYTICAL METHODS IN FINANCE AND ECONOMICS
Table of Contents
Question i.........................................................................................................................................2
Question ii........................................................................................................................................3
Question iii.......................................................................................................................................4
Question iv.......................................................................................................................................5
Question v........................................................................................................................................6
Question vi.......................................................................................................................................8
Question vii......................................................................................................................................8
Question viii.....................................................................................................................................9
Question ix.....................................................................................................................................10
Question x......................................................................................................................................11

2ANALYTICAL METHODS IN FINANCE AND ECONOMICS
Question i
Table 1: Descriptive statistics of recexp, inc and chd
As shown from the descriptive statistics, average weekly recreational expense of the
household is 130.14. The standard deviation for weekly recreational expense is 187.14. As the
standard deviation exceeds the mean expenses, it means recreational expenses are highly volatile.
The maximum and minimum weekly recreational expenses are 7700.86 and 5 respectively.
For the income series, the mean income of the household is 977.39. The obtained
standard deviation for the series is 642.07. As the standard deviation is smaller than mean
income, it can be said that household incomes are not much dispersed. The recorded household
income is as high as 8484.47 and as low as 185.03.
The descriptive statistics for number of children shows household on an average has 2
children. The standard deviation is 1.43. The smaller value of standard deviation of the series

3ANALYTICAL METHODS IN FINANCE AND ECONOMICS
means that values are not highly dispersed around mean. The maximum and minimum number of
children that the sample household have are 5 and 0 respectively.
Question ii
The regression model of weekly recreational expense on income to be estimated is
recexp=β0+ β1 inc+u
Table 2: Regression Result
From the regression result, the obtained regression equation is
recexp=30.4485+0.1020 inc
The regression coefficient of income is 0.1020. The positive value of coefficient indicates
a positive relation between income and weekly recreational expenses. That is as income
increases, weekly expense on recreational activities increases and vice versa. From the
coefficient estimate, it can be said that a 10 percent increase in household income increases