A stock portfolio consisting of the 10 companies identified by Fortune magazine each year as America’s most admired companies was compared to the overall U.S. stock market [24]. A least squares regression was used to analyze the relationship between the risk-adjusted daily percentage return on the Fortune portfolio RF with the riskadjusted daily return on the market as a whole RM:

There were 5,547 observations. The standard errors are in parentheses.

a. The average value of R_M is 0.0522 percent (this is not 5 percent, but about 1/20 of 1 percent). What is the average value of R_F?

b. Is the difference between the average value of R_F and R_M substantial? Explain your reasoning.

b. Test the null hypothesis that the slope is equal to 1.

c. Test the null hypothesis that the intercept is equal to 0.

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Rp=0.0270+0.9421RM, R2 = 0.809 R (0.0075) (0.0110)