Full name Student ID Number Program Module Word Count 1.

Introduction

: La Ode Sabaruddin : 139040727 : Accounting and Finance MSc : Financial Modeling (MN7024) : 1965 (References and appendix are not included)

This report aims to investigate stock performance of new listed companies, the companies in which launched initial public offering (IPO) in stock market. Based on theoretical review and empirical studies, five variables are considered as determinants of IPO companies stock returns, namely: age of company, total assets, ownership concentration, founder, rate of return on capital employed (ROCE), and industry or sectors where the company operates1. The report, therefore, will assess the notion of these relationships through both descriptive and inferential statistics. 300 samples are selected to conduct the analysis. 2. Model Specification, Variables Definitions and Measurements Model specification is the process of converting theories into a regression model (Lee, et. al., 1999 p. 178). Referring to prior studies, stock returns of IPO companies are primarily determined by a linear combination of five explanatory variables, as mentioned before. The theoretical model can be written as follows:

(Adapted from Wooldridge, 2002 p.48) Variables definitions and measurements: IPOreturn = rate of return three years after IPO launched, Pt / Pt-0, where Pt-0 represents the IPO price, and Pt the trading price three years subsequently (%) age = age of company (years) size = total assets of the company ( million) con = ownership concentration, percentage shares of pre-IPO owners post floatation (%). founder = CEO is also founder of the company: 1 if yes 0 if no ROCE = average return on capital employed over the year prior to IPO (%)
1

Other determinants of IPO return exist in literature, see, for example, Bansal and Khanna (2012); Bessler and Thies (2007); and Ritter and Welch (2002).

industry = Sector in which company operates: 1 if computer hardware/electronics 2 if pharmaceuticals 3 if other manufacturing 4 if software development 5 if other services u = unobservable random disturbance of error 3. Statistical Analysis

3.1. Univariate Analysis Descriptive Statistics Descriptive statistics describes characteristics and spread of data through graph and numerical summaries. Table 1 presents characteristics of IPO sample companies for continues variables, while categorical variables are presented in table 2. Table 1 Characteristics of IPO Sample Companies Continues Variables
Continues Variables Size Con 18355.28 28.85 9600.135 17.082 0.004 0.001 0.000 0.000

Mean Standard deviation Normality tests (p-values): - Kolmogorov-Smirnov - Shapiro-walk

IPOreturn 20.241 27.910 0.000 0.000

Age 14.63 2.793 0.000 0.001

ROCE 35.48 24.625 0.200 0.268

From the above table we can see that: - IPO return, size, ownership concentration, and ROCE variables have relatively wider data spreads, indicated by high values of standard deviation. On the other hand, data of age variable are closer to its mean, indicated by lower value of standard deviation. - Normality tests indicate that ROCE variable has normal distribution, while others not. Central limit theorem, however, says that random variables with large samples (i.e. >30) will be normally distributed (Watsham and Parramore, 1997 p.136-137). For graphical figures of continues variables, see appendix 1 section a.

Table 2 Characteristics of IPO Sample Companies Categorical Variables

Frequency Industry Sectors: Computer hardware/electronics Pharmaceuticals Other manufacturing Software development Other services Total Founder: CEO is also founder of the company CEO is not founder of the company Total 53 17 113 9 108 300 88 212 300 Percentage 17.7 5.7 37.7 3.0 36.0 100 29.3 70.7 100

In total of 300 IPO sample companies, other manufacturing and other services sectors are the two largest sample companies with 37.7% and 36% respectively, whereas software development sector is the least which occupied only 3% of the total samples. In terms of founder, 70.7% of IPO sample companies have CEOs, which also the founder, whereas CEOs of 29.3% companies are not the founder. For graphical figures of categorical variables, see appendix 1 section b. 3.2. Bivariate Analysis - Correlations Correlation indicates the strength of relationship between two variables. We assess correlations among continues variables using Pearson correlation and scatterplot, while association between continues variables and categorical variables are assessed through analysis of variance (ANOVA) and boxplots. Association among categorical variables is examined through chi-square test. Correlations between Explanatory Variables and Dependent Variable Based on statistical outputs in appendix 2 section a, correlations between explanatory variables and dependent variable can be summarized as follows: - IPO return has positive relationship and moderate in strength with ROCE, means that higher values of ROCE associate with higher values of IPO return (r=0.638). Similarly, ownership concentration and size of company have positive relationships with IPO return, but very weak in strength (r=0.136 and r=0.120 respectively). On the other hand, IPO return tends not to correlate with age of company (r=-0.056). For the graphical figures, see scatterplots.

- Company in which the CEO is also the founder tends to associate with higher IPO returns, while company in which the CEO is not the founder tends to have lower values of IPO returns (ANOVA test shows that these two groups of companies have different means, p=0.000). On the other hand, higher or lower IPO returns tends not to associate with particular industries or sectors where the companies operate (ANOVA test has p=0.868). For the graphical figures, see boxplots. Correlations Within Explanatory Variables Correlations statistics within explanatory variables as shown in appendix 2, section (b) indicate that most of explanatory variables are not correlate each other. The exceptions are ownership concentration which has a weak negative relationship with age of company (r=-0.318, see also scatterplot), and ROCE which has positive association with founder where higher values on the ROCE tends to associate with company in which the CEO is also the founder (ANOVA test has p=0.000, see also boxplot). Later on, we will assess these correlations in multivariate analysis whether it violates multicollinearity assumption or not. 3.3. Multivariate Analysis - Multiple Linear Regression Since the model consists of several explanatory variables (see equation 2 in model specification), we run multiple linear regressions to conduct the analysis. Statistical outputs as shown in appendix 3, section (a) highlight that p-value for regression model F-test is .000 and adjusted R-square=0.519, means explanatory variables in the model are simultaneously account for 51.9% to explain variability in IPO returns. Partially, size of company, ownership concentration, and founder are statistically significant to predict IPO returns (p-values<0.05), means these explanatory variables can be employed to predict future stock performance of IPO companies. On the other hand, age of company and industry or sectors where company operates are statistically insignificant to predict IPO return (p-values >0.05), means we find no support that different ages of company or different sectors of industry will result in different future stock performance of IPO companies. To capture differences in industry sectors, we create dummy variables for each sectors of industry, as shown in equation (3).

Again, the results (see appendix 3, section b) confirmed that all sectors or industry have identic average value of IPO returns, indicated by insignificant p-values of all dummy variables for industry. These insignificant outcomes, however, cannot be interpreted in a strict sense since this report employs cross-sectional data, which has less power to capture such differences. Then, we rerun the model while omitting insignificant variables. The result shows higher adjusted R-square (0.521) than the previous value (0.519), indicates that insignificant variables are irrelevant to predict IPO returns. Hence, estimated model of the relationships between IPO return and its explanatory variables can be expressed:

As IPO return is a linear combination of four explanatory variables in equation (4), the model can be interpreted as follows: Intercept: If values of all explanatory variables in the model are zero, then IPO return is -29.201%. Slope of continues variables: If other variables in the model are fixed, then for each change of 1 million in assets (size), then the model predicts that IPO returns increases by 0.0004 %; If the ownership concentration increases by 1 %, then IPO returns will increase by approximately 0.248% while holding other variables constant; For each change of 1 % in ROCE, average increase in the mean of IPO returns is about 0.678 % while controlling other variables constant. Slope of categorical variable: Company in which the CEO is also the founder has higher IPO return average of 16.004% than company in which the CEO is not the founder. Testing the Assumptions of OLS Linear Regression Model Assumption testing of OLS regression is necessary to obtain a valid model. In this report, assumption tests include multicollinearity, heteroscedasticity, normality of residuals and model specification. The tests use STATA program and the results are summarized as follows (Appendix 4): - Collinearity statistics show that all variables have VIF values around 1 and tolerance values around 0.9, means multicollinearity doesnt exist in the model. - Heteroscedasticity is assessed through Whites test and Breusch-Pagan test. Both tests confirmed that the model has heteroscedasticity problem (p-values < 0.05),

means the variance is not homogenous. The plotted residuals is also supported the arguments (see rvfplot). - Normality of residuals is examined by plotting ordered values of standardized residuals against expected values from standard normal distribution. The plots include kernel density plot, P-P plot (pnorm plot), and quantiles plot (qnorm plot). The results show a slight deviation from normality. These results are also confirmed by Shapiro-Wilk W test (p-value=0.00571). However, since we have large samples, central limit theorem can be applied. - Model specification is evaluated by linktest and Ramsey Reset test. Linktest shows that predicted values squares (hatsq) is significant, means the model has a specification error. Likewise, the Ramsey Reset test is significant, indicates that there could be omitted variable in the model, which it should. In conclusion, both tests indicate that the model may not be correctly specified. Interaction Terms Refer to estimated model in equation (4), we check whether interaction terms between dummy variable and other explanatory variables in the model exist or not through regress equation (5).

The results show that the effects of company size, ownership concentration, and ROCE are higher in a company where the CEO is also the founder (p-values < 0.05). 4. Conclusion and Limitations This report examines whether age of company, size, ownership concentration, founder, ROCE, and industry or sectors where the company operates can predict stock return performance of IPO companies. The major findings are summarized as follows: Size of company, ownership concentration, founder and ROCE are statistically significant to influence the stock return of IPO companies, which account for 52.1%, while 47.9 remains unexplained. On the other hand, we find no support that age of company and industry sectors can predict future stock performance of IPO companies.

The company in which the CEO is also the founder has higher average of IPO returns than the company in which the CEO is not the founder.

The effects of company size, ownership concentration and ROCE to stock return of IPO companies are higher in a company where the CEO is also the founder.

Having said that, this report has some limitations: 1. There may be a problem of error specification and potential omitted variable bias in the model, as the model doesnt satisfy the specification test. In addition, the model also has a problem of heteroscedasticity. 2. Coefficient determination of the model is relatively low, and therefore it is advisable to include other powerful explanatory variables in future empirical research. 3. The model only employs linear approach, while real-world financial time series are likely to have both linear and nonlinear patterns, and therefore an approach, which combines linear-nonlinear method will produce a more precise result. 4. As the employed data is cross section, it may less accurate to capture intercompany or industry sector differences as well as intra-company or sector dynamics. Using panel data and larger sample size will give greater capacity to capture the complexity of the relationships, include controlling the impact of omitted variables.

References Bansal, R. and Khanna A., 2012. Determinants of IPOs Initial Return: Extreme Analysis of Indian Market. Journal of Financial Risk Management, 1 (4), pp. 6874. Bessler, W. and Thies, S., 2007. The long-run performance of initial public offerings in Germany. Managerial Finance, 33 (6), pp. 420-441. Lee, C.F., Lee, J.C. and Lee, A. C., 1999. Statistics for Business and Financial Economics. Singapore: World Scientific Publishing. Ritter, J.R. and Welch, I., 2002. A Review of IPO activity, pricing and allocations. Journal of Finance, 57(4), pp. 1795-1828. Watsham, T.J. and Parramore, K., 1997. Quantitative Methods in Finance. Singapore: South Western Cengage Learning. Wooldridge, J.M., 2002. Econometric Analysis of Cross Section and Panel Data. Massachusetts: MIT Press.

Appendix 1 - Univariate Analysis a. Continues Variables Data Distribution

b. Categorical Variables Data Distribution

Appendix 2 Bivariate Analysis a. Relationships between explanatory variables and dependent variable Pearson Correlation - Continues explanatory variables and dependent variable
Correlations Iporeturn Pearson Correlation iporeturn Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N 300 -.056 .338 300 .120* .038 300 .136* .018 300 .638** .000 300 1 age -.056 .338 300 1 300 -.009 .874 300 -.318** .000 300 -.007 .910 300 size .120
*

con .136
*

Roce .638** .000 300 -.007 .910 300 -.065 .258 300 -.059 .306 300 1 300

.038 300 -.009 .874 300 1 300 .019 .748 300 -.065 .258 300

.018 300 -.318** .000 300 .019 .748 300 1 300 -.059 .306 300

Age

Size

Con

Roce

*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed).

Scatterplots - Continues explanatory variables and dependent variable

Analysis of Variance (ANOVA): Categorical explanatory variables and Continues dependent Variable ANOVA - IPO return and Founder Iporeturn Sum of Squares Between Groups Within Groups Total 40475.336 192433.990 232909.327 df 1 298 299 Mean Square 40475.336 645.752 F 62.679 Sig. .000

ANOVA IPO return and Industry Iporeturn Between Groups Within Groups Total Sum of Squares 988.124 231921.202 232909.327 df 4 295 299 Mean Square 247.031 786.174 F .314 Sig. .868

Boxplots Categorical explanatory variables and continues dependent variable

b. Relationships within explanatory variables Pearson Correlation Correlations between Continues explanatory variables
Correlations age Pearson Correlation age Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) 300 -.009 .874 300 -.318** .000 300 -.007 .910 1 size -.009 .874 300 1 300 .019 .748 300 -.065 .258 300 con -.318
**

roce -.007 .910 300 -.065 .258 300 -.059 .306 300 1 300 .000 300 .019 .748 300 1

size

con

300 -.059 .306 300

roce

N 300 **. Correlation is significant at the 0.01 level (2-tailed).

Scatterplots Correlations between continues explanatory variables

Analysis of Variance (ANOVA): Categorical explanatory variables and Continues explanatory Variables
ANOVA Founder and Continues Explanatory Variables Sum of Squares Between Groups age Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total 10.748 2321.438 2332.187 284679531.259 27271932811.221 27556612342.480 8842.276 172464.640 181306.917 385.340 86856.910 87242.250 df 1 298 299 1 298 299 1 298 299 1 298 299 Mean Square 10.748 7.790 284679531.259 91516553.058 8842.276 578.740 385.340 291.466 3.111 .079 F 1.380 Sig. .241

size

15.278

.000

roce

1.322

.251

con

ANOVA Industry and Continues Explanatory Variables Sum of Squares 32.294 2299.893 2332.187 609291110.615 26947321231.86 5 27556612342.48 0 1513.115 179793.802 181306.917 2055.916 85186.334 87242.250 df 4 295 299 4 295 299 4 295 299 4 295 299 378.279 609.471 513.979 288.767 .621 .648 Mean Square 8.073 7.796 152322777.654 91346851.633 F 1.036 Sig. .389

age

Between Groups Within Groups Total Between Groups Within Groups Total

1.668

.158

size

roce

Between Groups Within Groups Total Between Groups Within Groups Total

1.780

.133

con

Boxplots Categorical explanatory variables and continues explanatory variables

Pearson Chi-Square Categorical explanatory variables Chi-Square Tests Founder and Industry Value 1.561a 1.483 .126 300 df 4 4 1 Asymp. Sig. (2-sided) .816 .830 .723

Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases

a. 2 cells (20.0%) have expected count less than 5. The minimum expected count is 2.64.

Appendix 3 Multivariate Analysis a. Multiple Linear Regression All variables

Model Summaryb Model 1 R .727a R Square .529 Adjusted R Square .519 Std. Error of the Estimate 19.34867

a. Predictors: (Constant), industry Industry, founder Founder, con, size, roce, age b. Dependent Variable: iporeturn ANOVAa Model Regression 1 Residual Total Sum of Squares 123218.578 109690.748 232909.327 df 6 293 299 Mean Square 20536.430 374.371 F 54.856 Sig. .000b

a. Dependent Variable: iporeturn b. Predictors: (Constant), industry Industry, founder Founder, con, size, roce, age
Coefficientsa Model Unstandardized Coefficients B (Constant) Age Size 1 Con founder Roce industry -36.015 .228 .000 .263 16.051 .681 .810 Std. Error 8.735 .426 .000 .070 2.545 .047 .778 .023 .133 .161 .262 .601 .042 Standardized Coefficients Beta -4.123 .534 3.279 3.779 6.308 14.490 1.041 .000 .593 .001 .000 .000 .000 .299 -.056 .120 .136 .417 .638 -.017 .031 .188 .216 .346 .646 .061 .021 .131 .151 .253 .581 .042 .883 .976 .885 .930 .934 .973 1.133 1.025 1.130 1.076 1.071 1.027 Zero-order Partial Part t Sig. Correlations Collinearity Statistics Tolerance VIF

a. Dependent Variable: iporeturn

b. Multiple Linear Regression All variables + Dummy variables for industry sectors
Model Summaryb Model 1 R .729a R Square .531 Adjusted R Square .516 Std. Error of the Estimate 19.41089

a. Predictors: (Constant), d4_sector4, age, roce, d2_sector2, size, d1_sector1, founder Founder, con, d3_sector3

b. Dependent Variable: iporeturn ANOVAa Model Regression 1 Residual Total Sum of Squares 123642.326 109267.001 232909.327 df 9 290 299 Mean Square 13738.036 376.783 F 36.461 Sig. .000b

a. Dependent Variable: iporeturn b. Predictors: (Constant), d4_sector4, age, roce, d2_sector2, size, d1_sector1, founder Founder, con, d3_sector3
Coefficientsa Model Unstandardized Coefficients B (Constant) Age Size Con founder 1 Roce d1_sector1 d2_sector2 d3_sector3 d4_sector4 .679 -3.003 -1.263 -1.791 6.061 .047 3.287 5.131 2.662 6.846 .599 14.362 -.041 -.010 -.031 .037 -.914 -.246 -.673 .885 .000 .362 .806 .501 .377 .638 .018 .031 -.032 .049 .645 -.054 -.014 -.039 .052 .578 -.037 -.010 -.027 .036 .929 .799 .893 .755 .921 1.077 1.251 1.120 1.324 1.086 -31.614 .211 .000 .253 16.276 Std. Error 7.888 .429 .000 .071 2.564 .021 .131 .155 .266 Standardized Coefficients Beta -4.008 .490 3.178 3.569 6.348 .000 .624 .002 .000 .000 -.056 .120 .136 .417 .029 .183 .205 .349 .020 .128 .144 .255 .876 .958 .861 .922 1.141 1.043 1.161 1.085 Zero-order Partial Part t Sig. Correlations Collinearity Statistics Tolerance VIF

a. Dependent Variable: iporeturn

c. Multiple Linear Regression Insignificant variables are excluded

Model Summaryb Model 1 R .726a R Square .527 Adjusted R Square .521 Std. Error of the Estimate 19.32410

a. Predictors: (Constant), roce, con, size, founder Founder b. Dependent Variable: iporeturn

ANOVAa Model Regression 1 Residual Total Sum of Squares 122750.220 110159.106 232909.327 df 4 295 299 Mean Square 30687.555 373.421 F 82.180 Sig. .000b

a. Dependent Variable: iporeturn b. Predictors: (Constant), roce, con, size, founder Founder
Coefficientsa Model Unstandardized Coefficients B Std. Error (Constant) Size 1 Con founder Roce -29.201 .0003774 .248 16.004 .678 3.701 .000 .066 2.539 .047 .130 .152 .262 -7.890 3.212 3.770 6.304 .000 .001 .000 .000 .000 .120 .136 .417 .638 .184 .214 .345 .644 .129 .151 .252 .579 .982 1.019 .990 1.010 .932 1.073 .938 1.066 Standardized Coefficients Beta Zero-order Partial Part t Sig. Correlations Collinearity Statistics Tolerance VIF

.598 14.467

a. Dependent Variable: iporeturn

Appendix 4 REGRESSION ASSUMPTION TESTS (STATA OUTPUT)

. regress iporeturn age size con founder roce industry Source Model Residual Total SS 123218.578 109690.747 232909.325 df 6 293 299 MS 20536.4297 374.371151 778.960954 Number of obs F( 6, 293) Prob > F R-squared Adj R-squared Root MSE = = = = = = 300 54.86 0.0000 0.5290 0.5194 19.349

iporeturn age size con founder roce industry _cons

Coef. .2278899 .000387 .2631583 16.0508 .6814775 .8097259 -36.01547

Std. Err. .4263863 .000118 .0696444 2.544542 .0470294 .7780957 8.734635

t 0.53 3.28 3.78 6.31 14.49 1.04 -4.12

P>|t| 0.593 0.001 0.000 0.000 0.000 0.299 0.000

[95% Conf. Interval] -.6112783 .0001547 .1260916 11.04291 .5889192 -.7216392 -53.20605 1.067058 .0006192 .400225 21.0587 .7740358 2.341091 -18.82489

. regress iporeturn size con founder roce Source Model Residual Total SS 122750.22 110159.105 232909.325 df 4 295 299 MS 30687.555 373.420696 778.960954 Number of obs F( 4, 295) Prob > F R-squared Adj R-squared Root MSE = = = = = = 300 82.18 0.0000 0.5270 0.5206 19.324

iporeturn size con founder roce _cons

Coef. .0003774 .2478889 16.00441 .6778655 -29.20125

Std. Err. .0001175 .0657597 2.538823 .0468565 3.700855

t 3.21 3.77 6.30 14.47 -7.89

P>|t| 0.001 0.000 0.000 0.000 0.000

[95% Conf. Interval] .0001462 .1184714 11.00791 .58565 -36.48468 .0006087 .3773064 21.00091 .7700809 -21.91783

NORMALITY TESTS OF RESIDUALS . predict r, resid . kdensity r, normal

Kernel density estimate

Density

.005 0

.01

.015

.02

.025

-50

0 Residuals

50 Kernel density estimate Normal density

100

kernel = epanechnikov, bandwidth = 4.9020

. pnorm r
1.00 Normal F[(r-m)/s] 0.00
0.00

0.25

0.50

0.75

0.25

0.50 Empirical P[i] = i/(N+1)

0.75

1.00

. qnorm r
100 Residuals -50 0
-50

50

0 Inverse Normal

50

. swilk r
Shapiro-Wilk W test for normal data Variable r Obs 300 W 0.98621 V 2.938 z 2.529 Prob>z 0.00571

HOMOSCEDASTICITY TESTS . rvfplot, yline(0)

100 Residuals -50
-40

50

-20

20 Fitted values

40

60

. estat imtest Cameron & Trivedi's decomposition of IM-test

Source Heteroskedasticity Skewness Kurtosis Total

chi2 26.96 13.58 2.40 42.94

df 13 4 1 18

p 0.0126 0.0088 0.1214 0.0008

. estat hettest Breusch-Pagan / Cook-Weisberg test for heteroskedasticity Ho: Constant variance Variables: fitted values of iporeturn chi2(1) Prob > chi2 = = 22.82 0.0000

MULTICOLLINEARITY TEST
. regress iporeturn size con founder roce Source Model Residual Total SS 122750.22 110159.105 232909.325 df 4 295 299 MS 30687.555 373.420696 778.960954 Number of obs F( 4, 295) Prob > F R-squared Adj R-squared Root MSE = = = = = = 300 82.18 0.0000 0.5270 0.5206 19.324

iporeturn size con founder roce _cons

Coef. .0003774 .2478889 16.00441 .6778655 -29.20125

Std. Err. .0001175 .0657597 2.538823 .0468565 3.700855

t 3.21 3.77 6.30 14.47 -7.89

P>|t| 0.001 0.000 0.000 0.000 0.000

[95% Conf. Interval] .0001462 .1184714 11.00791 .58565 -36.48468 .0006087 .3773064 21.00091 .7700809 -21.91783

. vif Variable founder roce size con Mean VIF VIF 1.07 1.07 1.02 1.01 1.04 1/VIF 0.931615 0.938088 0.981521 0.989811

MODEL SPECIFICATION TEST . linktest

Source Model Residual Total SS 130133.203 102776.122 232909.325 df 2 297 299 MS 65066.6016 346.047549 778.960954 Number of obs F( 2, 297) Prob > F R-squared Adj R-squared Root MSE = = = = = = 300 188.03 0.0000 0.5587 0.5558 18.602

iporeturn _hat _hatsq _cons

Coef. .6709956 .0092055 -.8786877

Std. Err. .0888404 .001993 1.531233

t 7.55 4.62 -0.57

P>|t| 0.000 0.000 0.567

[95% Conf. Interval] .4961591 .0052834 -3.89213 .845832 .0131276 2.134755

. ovtest
Ramsey RESET test using powers of the fitted values of iporeturn Ho: model has no omitted variables F(3, 292) = 7.23 Prob > F = 0.0001

. regress iporeturn age con founder industry roce size Source Model Residual Total SS 123218.578 109690.747 232909.325 df MS Number of obs F( 6, 293) Prob > F R-squared Adj R-squared Root MSE = = = = = = 300 54.86 0.0000 0.5290 0.5194 19.349

6 20536.4297 293 374.371151 299 778.960954

iporeturn age con founder industry roce size _cons

Coef. .2278899 .2631583 16.0508 .8097259 .6814775 .000387 -36.01547

Std. Err. .4263863 .0696444 2.544542 .7780957 .0470294 .000118 8.734635

t 0.53 3.78 6.31 1.04 14.49 3.28 -4.12

P>|t| 0.593 0.000 0.000 0.299 0.000 0.001 0.000

[95% Conf. Interval] -.6112783 .1260916 11.04291 -.7216392 .5889192 .0001547 -53.20605 1.067058 .400225 21.0587 2.341091 .7740358 .0006192 -18.82489

. linktest Source Model Residual Total SS 130679.95 102229.375 232909.325 df MS Number of obs F( 2, 297) Prob > F R-squared Adj R-squared Root MSE = = = = = = 300 189.83 0.0000 0.5611 0.5581 18.553

2 65339.9752 297 344.206649 299 778.960954

iporeturn _hat _hatsq _cons

Coef. .6734393 .0091313 -.8816762

Std. Err. .087824 .0019613 1.52568

t 7.67 4.66 -0.58

P>|t| 0.000 0.000 0.564

[95% Conf. Interval] .5006033 .0052716 -3.88419 .8462754 .0129911 2.120838

. ovtest Ramsey RESET test using powers of the fitted values of iporeturn Ho: model has no omitted variables F(3, 290) = 7.29 Prob > F = 0.0001 .