At the snapshot below, you can see results from the second pass (cross- sectional) regression, where the estimated CAPM-beta from the first pass (time series) together with book-to-market and idiosyncratic volatility are related to average stock return. Write down the regression equation that was estimated in Excel. Interpret the results and conclude (based on the results) whether CAPM holds.

H SUMMARY OUTPUT Regression Statistics Multiple R 0.829088978 R Square 0.687388534 Adjusted R Square 0.531082801 7 Standard Error 0.005530651 Observations 10 df 10 ANOVA 11 12 Regression u Residual 3 Total 15 3 6 9 SS MS F Significance F 0.000403554 0.000134518 4.397717985 0.058427488 0.000183529 3.05881E-05 0.000587082 15 17 Intercept 1 Mit Beta 19 Sum Squared Residuals 20 Book-to-Market Coefficients Standard Error 0.00030 0.00514 -0.00275 0.00502 0.09816 0.03258 -0.00418 0.00438 Stot 0.05847 -0.54840 3.01322 -0.95406 P-value 0.95528 0.60321 0.02360 0.37689 Lower 95% Upper 95% Lower 95.0% Upper 95.0% -0.01228 0.01288 -0.01228 0.01288 -0.01505 0.00954 -0.01505 0.00954 0.01845 0.17788 0.01845 0.17788 -0.01490 0.00654 -0.01490 0.00654 H SUMMARY OUTPUT Regression Statistics Multiple R 0.829088978 R Square 0.687388534 Adjusted R Square 0.531082801 7 Standard Error 0.005530651 Observations 10 df 10 ANOVA 11 12 Regression u Residual 3 Total 15 3 6 9 SS MS F Significance F 0.000403554 0.000134518 4.397717985 0.058427488 0.000183529 3.05881E-05 0.000587082 15 17 Intercept 1 Mit Beta 19 Sum Squared Residuals 20 Book-to-Market Coefficients Standard Error 0.00030 0.00514 -0.00275 0.00502 0.09816 0.03258 -0.00418 0.00438 Stot 0.05847 -0.54840 3.01322 -0.95406 P-value 0.95528 0.60321 0.02360 0.37689 Lower 95% Upper 95% Lower 95.0% Upper 95.0% -0.01228 0.01288 -0.01228 0.01288 -0.01505 0.00954 -0.01505 0.00954 0.01845 0.17788 0.01845 0.17788 -0.01490 0.00654 -0.01490 0.00654