Peculiarities of modelling of the enterprise investment attractiveness in the conditions of multicollinearity of predictors

Abstract

© Medwell Journals, 2017. The study presents an approach to assess the enterprise investment attractiveness based on the econometric modeling of return on assets. The researchers underline the key role of financial indicators in assessing investment attractiveness and propose a system of financial ratios of the enterprise-predictors of return on assets. In the conditions of collinearity of prognostic factors, the researchers offer to implement ridge regression which enables to obtain better prognostic characteristics to preserve reliability and informational value of the modelling. The researchers suggest tools to analyze how predictors of return on assets contribute to the assessment of investment attractiveness whose quality was tested using standard fisher and student tests and the standard error. The results of the empirical evaluations carried out using the Gretl Software confirmed their feasibility for potential investors, shareholders and owners in managing the use of capital effectively.