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One of the theories regarding initial public offering (IPO) pricing is that the initial return y (the percentage change from offer to open price) on an IPO depends on the price revision x (the percentage change from pre-offer to offer price). Another factor that may influence the initial return is a high-tech dummy variable that equals 1 for high-tech firms and 0 otherwise. The following table shows a portion of the data on 264 IPO firms from January 2001 through September 2004.

Initial Return	Price Revision	High-Tech
36.42	11.55	0
19.51	23.11	0
-2.67	24.50	1

excel data file:

Initial Return	Price Revision	High-tech
36.42	11.55	0
19.51	-23.11	0
2.35	-0.83	0
6.68	-43.04	1
0	-13.69	0
1.07	0	1
17.45	0	1
0	-24.16	0
0	-20.45	0
0	-3.35	0
-3.54	-7.14	0
13.75	7.97	0
5.89	1.78	0
16.95	9.48	1
6.56	-41.5	1
18.36	-33.1	1
5.11	4.73	1
-0.21	-46.15	1
6.67	-13.58	0
13.83	12.12	1
-28.61	-24.45	0
-10.07	13.52	0
32.57	32.63	1
12.57	-0.35	0
-8.27	-6.01	1
4.36	-45.42	1
3.56	-18.56	1
0	-24.21	0
16.49	9.38	0
8.05	0	1
12.12	0	0
9.79	-6.94	1
4.98	-18.13	0
14.85	-1.54	0
-0.62	-24.66	1
14.84	0	0
1.9	0	1
12.18	10.86	0
24.8	9.45	0
38.76	28.83	0
27.85	9.49	1
0	-6.98	0
3.63	-22.91	1
14.46	-26.65	0
11.05	3.39	0
0	0	0
8.57	6.68	1
-5.7	-3.49	0
10.74	9.8	1
0	2.58	1
1.97	-11.5	0
4.98	-20.83	1
11.65	5.4	1
0	-6.66	0
0.45	-8.04	0
0	-29.52	0
4.1	-7.02	1
31.45	22.05	0
11.48	8.33	0
4.14	-26.97	1
11.42	-26.4	1
0	-0.73	0
7.77	-3.77	0
31.29	19.6	0
39.73	34.03	1
-0.98	-37.03	1
12.62	1.39	0
2.98	0	0
38.05	20.92	0
4.83	-4.8	1
1.86	-18.24	0
0.91	0	0
16.77	6.67	1
0	-22.52	0
-2	-30.29	1
20.69	16.19	1
-13.91	-16.59	1
0	-12.44	0
-2.66	-3.04	1
11.99	0.36	0
25.24	11.04	1
13.59	-41.27	1
41.64	13.34	0
7.3	-37.71	0
11.08	-10.65	0
-2.98	0	0
0	-18.59	0
-0.97	-10.67	0
0	-26.13	1
7.35	-8.08	0
4.15	36.28	0
42.87	14.99	1
17.71	5.1	0
10.7	0	0
33.84	37.79	1
0	-29.54	1
3.06	-10.27	0
7.21	0	0
20.43	7.96	0
1.26	-13.68	0
11.03	3.18	0
12.67	-29.37	1
14.75	7.91	0
17.73	-18.33	1
5.61	8.09	1
8.32	-11.13	0
11.92	1.59	0
5.01	-8.7	0
11.08	-6.34	0
7.15	-0.43	0
1.9	-5.3	1
1.53	-2.64	1
0	0	0
0	-24.07	0
11.82	-34.42	1
40.7	43.44	1
0	-25.35	0
15.92	10.11	1
15.57	19.02	0
38.18	14.48	1
-8.67	-19.13	0
44.49	12.56	1
35	20.54	0
8.18	0.8	0
0	-11.82	0
9.87	0	0
0	-9.46	1
28.51	6.52	0
0	-13.35	0
0.51	-28.8	1
13.96	-24.67	1
0.03	-11.25	1
0	-14.98	0
39.79	-43.31	1
4.22	6.68	1
0	-24.62	0
21.7	-13.33	0
28.39	9.28	0
7.04	8.9	0
6.02	-4.55	1
-3.68	-6.49	0
-2.17	-2.42	0
13.01	-1.46	0
10.64	5.44	1
-0.84	-42.38	1
16.22	0	0
3.04	17.15	0
0	-28.97	0
2.4	-51.56	1
3.49	-23.49	1
9.57	0	1
1.57	-52.41	1
23.12	-0.13	0
-1.45	-9.67	1
4.81	-16.9	1
8.67	-4.89	0
10.44	0	0
22.52	18.26	0
-1.27	-22.35	0
18.41	3.74	1
-2.05	5.29	0
-1.55	-10.51	1
0	-10.17	1
5.08	-9.85	1
9.42	10.84	0
0	7.79	0
17.64	11.01	0
7.65	14.7	0
0	0	0
-0.93	-33.24	1
42.01	-45.93	1
3.24	-25.6	1
37.48	25.52	1
5.27	-5.4	1
3.3	-26.06	0
4.04	-7.58	0
18.21	-1.98	1
4.13	1.52	1
-4.92	-8.6	0
10.9	-24.36	0
1.65	-14.08	0
0	15.13	0
6.61	-7.55	0
8.81	16.72	0
0	-8.64	0
11.99	6.86	0
9.32	-23.95	1
5.48	-8.12	1
6.84	0	0
19.56	-21.4	1
0.04	-8.37	1
-2.19	0	0
8.19	2.67	1
-1.16	-12.55	0
18.18	0	0
-1.5	-1.58	0
-0.1	-16.82	0
12.44	5.66	0
5.18	0	0
12.18	0	0
18.85	7.79	0
3.07	-6.33	0
6.35	-48.81	1
6.02	0	0
-2.76	129.75	0
0	9.28	0
9.57	-10.7	0
2.9	-33.64	1
1.64	-16.83	1
0	-23.6	0
-1	-3.98	0
3.26	-14.88	0
20.52	23.26	1
2.42	-4.09	1
0	-2.31	0
23.97	8.81	1
0	-15.01	0
19.63	6.67	0
6.33	-58.01	0
30.88	-9.44	0
0	2.95	1
0.47	-19.14	0
-2.24	-11.12	0
0	-44.49	1
16.09	9.73	1
4.35	-12.24	0
8.13	0	0
17.19	0	0
4.48	1.63	1
8.48	-10.54	0
7.61	6.83	1
0	-20.84	0
0	-14.31	0
4.97	-27.78	1
16.31	32.94	1
4.66	10.96	0
3.69	-40.38	1
0	0	0
1.25	-27.88	0
3.78	-27.45	0
16.35	-0.68	0
27.52	0	0
-0.08	-29.08	1
-0.95	-1.54	1
16.81	-19.77	1
4	0	0
0	-4.34	0
12.54	12.84	0
6.54	-3.47	0
9.8	10.6	0
21.66	7.37	0
0	-9.9	0
0.97	0.46	0
18.58	-21.38	1
18.4	34.78	0
11.63	-17.97	0
0	-41.27	0
10.11	-39.33	1
10.3	-31.44	1
6.9	7.01	0
31.62	9.44	0
0	-10.78	0
18.89	15.35	0
-2.67	-24.5	1

a-1. Estimate y = _o + ₁x + ₂d + where the dummy variable d equals 1 for firms that are high-tech. (Round your answers to 2 decimal places.)

= + Price Revision + High-Tech

a-2. Use the estimated model to predict the initial return of a high-tech firm with a 10% price revision. (Round coefficient estimates to at least 4 decimal places and final answer to 2 decimal places.)

	Predicted return of a high-tech firm:

Answer & Explanation Solved by verified expert

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