FIL E Caterpillar, Inc. manufactures and sells heavy construction equipment worldwide. The performance of Caterpillar's stock is likely to be strongly influenced by the economy. For instance, during the subprime mortgage crisis, the value of Caterpillar's stock plunged dramatically. Monthly data for Caterpillar's risk-adjusted return and the riskadjusted market return are collected for a five-year period

(n = 60). A portion of the data is shown below. The entire data set is found on the text website, labeled Caterpillar.

Date R − Rf R M − R f 1/1/2006 17.66 2.21 2/1/2006 7.27 − 0.31 11/ 1/2010 3.37 2.15 SOURCE: Finance.yahoo.com and U.S. Treasury.

a. Estimate the CAPM m odel for Caterpillar, Inc. Show the regression results in a w ell-form atted table.

b. At the 5% significance level, determ ine if investm ent in Caterpillar is riskier than the m arket (beta significantly greater than 1).

c. At the 5% significance level, is there evidence o f abnorm al returns?