A Researcher Is Trying to Decide Whether or Not to Add

question 56

Essay

A researcher is trying to decide whether or not to add another variable to his model. He has estimated the following model from a sample of 28 observations. SSE = 1,425
SSR = 1,326
He has also estimated the model with an additional variable X₃. The results are SSE = 1,300
SSR = 1,451
What advice would you give this researcher? Use a .05 level of significance.

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Definitions:

Financial Asset

Any asset that is cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset.

Contractual Rights

Rights granted to an individual or entity based on the terms of a contract.

Derecognition

The process of removing a financial asset or liability from a company's financial statements, usually because it has been sold, repaid, or no longer meets the criteria for recognition.

Financial Liability

An obligation to transfer cash or other resources as a result of past transactions or events.