To examine the relationship between profits and dividends, a researcher decides to use a simple linear regression model: DIVIDENDST= Β1 + Β2PROFITS + UT The data required for this question are the dividends and profits time series given in data set _D303_TS3.DTA_. a) Examine your data to determine whether (i) the dividend and profit series are trend stationary or difference stationary (ii) are dividends and profits co-integrated? b) Employ the error correction mechanism to study the long and short run behaviourof dividends and profits.

/in /by

To examine the relationship between profits and dividends,
a researcher decides to use a simple linear regression model:

DIVIDENDST= Β1 + Β2PROFITS + UT

The data required for this question are the dividends and profits time
series given in data set _D303_TS3.DTA_.

a)  Examine your data to determine whether (i) the dividend and
profit series are trend stationary or difference stationary (ii) are
dividends and profits co-integrated?

b)  Employ the error correction mechanism to study the long and
short run behaviourof dividends and profits.

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