5. For each stock, estimate the following OLS regression: R; = di + BiRM +&i (Eq. 1) Where Ri = Stock i excess return di = Stock i alpha Bi = Stock i factor loading (beta) RM = Market index excess return &i = Stock i specific deviation b) Interpret the meaning of Bi in Eq.1. Why is this information useful? [3 marks] c) What is R2 measuring in Eq.1? Why is this information useful? [3 marks] d) What would happen to R2 if you added more factors to Eq. 1? Does a higher R2 always indicate a more accurate regression? Why? [3 marks] e) Are the factor loadings (betas) that you estimated statistically significant at the 5% level? How do you know that this is the case? [3 marks] 5. For each stock, estimate the following OLS regression: R; = di + BiRM +&i (Eq. 1) Where Ri = Stock i excess return di = Stock i alpha Bi = Stock i factor loading (beta) RM = Market index excess return &i = Stock i specific deviation b) Interpret the meaning of Bi in Eq.1. Why is this information useful? [3 marks] c) What is R2 measuring in Eq.1? Why is this information useful? [3 marks] d) What would happen to R2 if you added more factors to Eq. 1? Does a higher R2 always indicate a more accurate regression? Why? [3 marks] e) Are the factor loadings (betas) that you estimated statistically significant at the 5% level? How do you know that this is the case? [3 marks]