(Continuation of Problem XXXXXXXXXXPerform a variable selection analysis, using stepwise and best-subset programs. Compare the results with those of the variable selection analysis given in Chapter 9....

(Continuation of Problem 11.2.) Perform a variable selection analysis, using stepwise and best-subset programs. Compare the results with those of the variable selection analysis given in Chapter 9.

PROBLEM 11.2

For the data shown in Table 9.1, divide the chemical companies into two groups: group I consists of those companies with a P/E less than 9, and group II consists of those companies with a P/E greater than or equal to 9. Group I should be considered mature or troubled firms, and group II should be considered growth firms. Perform a discriminant function analysis, using ROR5, D/E, SALESGR5, EPS5, NPM1, and PAYOUTR1. Assume equal prior probabilities and costs of misclassification. Test the hypothesis that the population D 2 = 0. Produce a graph of the posterior probability of belonging to group I versus the value of the discriminant function. Estimate the probabilities of misclassification by several methods