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LOS 8.e: Calculate and interpret 1) a confidence READING 8: MULTIPLE REGRESSION AND ISSUES IN REGRESSION ANALYSIS
interval for the population value of a regression
coefficient and 2) a predicted value for the dependent
variable, given an estimated regression model and MODULE 8.2: HYPOTHESIS TESTS AND CONFIDENCE INTERVALS
assumed values for the independent variables.

PREDICTING THE DEPENDENT VARIABLE

EXAMPLE: Calculating a predicted value for the dependent variable: An analyst would like to use the estimated regression
equation from the previous example to calculate the predicted 10-year real earnings growth for the S&P 500, assuming the payout ratio
of the index is 50%. He observes that the slope of the yield curve is currently 4%.

Meaning?

If the:

1. S&P 500 firms maintain a dividend Payout Ratio (PR) of 50%; and
2. YCS remains 4%,

We predict real Earnings Growth Rate will be 1.46%