FILE A financial analyst w ould like to determ ine w h eth er th e return on Fidelity's M agellan m utual fund varies depending on th e quarter; th a t is, if th ere is a seasonal com ponent describing return. He collects 10 years of quarterly return d ata. A portion is show n in th e accom panying table; th e com plete data set can be found on th e tex t w ebsite, labeled M agellan dum m y.

Year Quarter Return d1 d2 d 3 2000 1 4.85 1 0 0 2000 2 – 3.96 0 1 0

⋮ ⋮ ⋮ ⋮ ⋮ ⋮

2009 4 4.06 0 0 0 S o u r c e : h t t p : / / f i n a n c e . y a h o o . c o m .

a. Estim ate y = β 0 + β1d1 + β2d2β + 3 d 3 + ε , w here y is M agellan's quarterly return, d 1 is a dum m y variable th at equals 1 if quarter 1 and 0 otherw ise, d2 is a dum m y variable th a t equals 1 if quarter 2 and 0 otherw ise, and d3 is a dum m y variable th at equals 1 if quarter 3 and 0 otherw ise.

b. In terp ret th e slope coefficients o f th e dum m y variables.

c. Predict M agellan's stock return in q u arters 2 and 4.