Assume a regression model in which the dependent variable is the firm's stock price percentage change, and the independent variable is percentage change in the foreign currency. The coefficient is negative. This implies that the company's stock price increases if the foreign currency appreciates.

Question

Quizplus · Accepted Answer

A negative coefficient indicates an inverse relationship between the dependent and independent variables, meaning that as the independent variable (percentage change in the foreign currency) increases, the dependent variable (firm's stock price percentage change) decreases. Therefore, the company's stock price would decrease if the foreign currency appreciates, not increase.

Assume a Regression Model in Which the Dependent Variable Is