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Posted by Kent on January 10, 2000 at 18:26:10:
In Reply to: Negative Beta Values posted by Lisa on January 10, 2000 at 18:03:33:
Lisa,
As you probably know, any Beta is the marginal effect of the independent
variable on the dependent variable. The absolute value of the beta indicates the
degree of the marginal effect, while the "sign" provides the information
regarding whether the marginal relationship is positive or negative.
As an example: Let assume that we are regressing advertising expenditures
against sales. The dependent variable "sales" is expected to increase or
decrease in relation to advertising expenditures. Let us assume we compute
a beta for advertising expenditures of 1.50. The analysis would be suggest
that for each one unit increase in advertising expenditures, we would realize a 1.5
unit "INCREASE" in sales. Now if the beta is negative, it implies that for every one
unit increase in advertising expenditures, we would realize a 1.5 unit "DECREASE"
in sales. The positive sign indicates a positive relationship, the negative sign
indicates a negative ralationship.
I hope this helps.
Subject: