29. In an article in the Journal of Finance(March 1983) ,Jess Chua and Richard Woodward investigated the investment skill of the legendary economistJohn Maynard Keynes. A portfolio managed by Keynes had the following returns:

Chua and Woodward concluded that Keynes demonstrated superior investment abilities. They did not, however, distinguish between his market timing and security selection skills. Using the quadratic regression and dummy variable techniques, evaluate Keynes 's market timing skills. (Hint: Use ofa regression package found in a standard personal computer spreadsheet program is highly recommended.)

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Keynes's Market Riskfree Return Return Return 1928 -3.4% 7.9% 4.2 1929 .8 6.6 5.3 1930 -32.4 -20.3 2.5 1931 -24.6 -25.0 3.6 1932 44.8 -5.8 1.6 1933 35.1 21.5 .6 1934 33.1 -7 .7 1935 44.3 5.3 .6 1936 56.0 10.2 .6 1937 8.5 -5 .6 1938 -40.1 --16.1 .6 1939 12.9 -7.2 1.3 1940 -15.6 -12.9 1.0 1941 33.5 12.5 1.0 1942 -.9 .8 1.0 1943 53.9 15.6 1.0 1944 14.5 5.4 1.0 1945 14.6 .8 1.0