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Consider the following model RPt- RFt=a+B1(RMt-RFt)+B2SMBPt+ePt, where RPt is the return on a professionally managed portfolio P at day t, RFt is the return on

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Consider the following model RPt- RFt=a+B1(RMt-RFt)+B2SMBPt+ePt, where RPt is the return on a professionally managed portfolio P at day t, RFt is the return on the risk-free asset Fat day t, RMt is the return on the market portfolio M at day t, SMBt is the small minus big Fama-French factor at day t, and Pt is the unsystematic component in RPt. To estimate the model you use monthly data from January 2000 to December 2021. Using Excel, your estimates for the parameters a, 31 and 32 are 0.145, 0.892, and 0.062, respectively, and you find as P-values - 0.001, 0.000, and 0.227 respectively. The estimated R-square is 0.897. 1. What percentage of the variance in the excess returns on portfolio P is due to the excess returns on the market and the high minus low factor? 2. Interpret B1 and B2. Are these coefficients statistically significant when the level of significance is 5%? 3. Is portfolio P mispriced? Consider the following model RPt- RFt=a+B1(RMt-RFt)+B2SMBPt+ePt, where RPt is the return on a professionally managed portfolio P at day t, RFt is the return on the risk-free asset Fat day t, RMt is the return on the market portfolio M at day t, SMBt is the small minus big Fama-French factor at day t, and Pt is the unsystematic component in RPt. To estimate the model you use monthly data from January 2000 to December 2021. Using Excel, your estimates for the parameters a, 31 and 32 are 0.145, 0.892, and 0.062, respectively, and you find as P-values - 0.001, 0.000, and 0.227 respectively. The estimated R-square is 0.897. 1. What percentage of the variance in the excess returns on portfolio P is due to the excess returns on the market and the high minus low factor? 2. Interpret B1 and B2. Are these coefficients statistically significant when the level of significance is 5%? 3. Is portfolio P mispriced

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