Factor 1 Factor 2 Factor 3 Period 1 2 Portfolio A 1.06% 7.66 0.01% -0.93% -1.70% Portfolio B 0.00% 6.67 5.99 6.87 0.33 -1.24 3 4.93 4.76 1.88 -1.47 0.38 4 1.21 0.34 0.59 0.18 5 -1.99 -3.70 4.21 -1.66 2.30 -2.86 2.77 6 4.26 -3.33 -1.51 7 -0.69 -2.41 -2.62 -4.44 -5.84 -1.79 5.69 8 -15.41 -15.41 6.04 -16.08 5.92 9 4.13 0.03 -3.83 10 7.01 -3.31 6.75 5.57 4.99 -2.90 -3.72 11 5.85 1.41 12 -0.31 -4.98 6.01 3.51 13 2.81 1.25 7.68 7.80 9.60 5.16 -3.28 5.43 2.48 -2.85 6.59 -6.06 1.73 14 -0.57 -4.09 -5.50 15 3.25 -3.92 -3.05 16 4.40 2.96 2.77 2.53 7.30 0.07 3.75 17 -2.39 3.07 3.53 3.43 18 4.71 -4.30 19 -3.27 1.97 20 -1.15 -0.50 -4.09 0.09 -3.44 -1.32 -2.61 -1.20 0.66 -1.16 -3.23 21 -1.56 3.24 22 5.34 5.72 -3.15 -6.47 7.71 3.21 23 24 6.11 1.97 7.26 -4.90 2.24 7.03 -8.10 -9.01 7.78 6.98 25 -4.33 4.00 -2.87 -2.09 21.44 26 27 1.04 8.97 2.57 5.21 -0.25 -11.98 7.89 5.24 -16.72 28 -4.30 -2.93 -6.15 -7.56 8.63 29 -4.22 -3.34 3.79 -0.66 1.73 -5.81 13.23 5.30 -8.81 30 4.77 Using regression analysis, calculate the factor betas of each stock associated with each of the common risk factors. Which of these coefficients are statistically significant at 5% level of significance? Fill in the table below. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers for factor betas to three decimal places and answers for t-statistics to two decimal places. bi t-statistic Significance Regression for Portfolio A Constant -Select- Factor 1 -Select- Factor 2 -Select- Factor 3 3 -Select- Regression for Portfolio B Constant -Select- Factor 1 -Select- Factor 2 -Select- Factor 3 -Select- b. How well does the factor model explain the variation in portfolio returns? On what basis can you make an evaluation of this nature? The factor models explain -Select- as the -Select v values in both regressions are -Select- c. Suppose you are now told that the three factors used in the models represent the risk exposures in the Fama-French characteristic-based model (i.e., excess market, SMB, and HML). Based on your regression results, which one of these factors is the most likely to be the market factor? Explain why. ... -Select- v is the most likely candidate for the market factor, because it has a -Select- effect on both portfolios. d. Suppose it is further revealed that Factor 3 is the HML factor. Which of the two portfolios is most likely to be a growth-oriented fund and which is a value-oriented fund? Explain why. is the more likely candidate for the value-oriented portfolio as it has a -Select- v loading on this factor. - -Select- -Select is the more likely candidate for the growth-oriented portfolio as it has a -Select- loading on this factor. Factor 1 Factor 2 Factor 3 Period 1 2 Portfolio A 1.06% 7.66 0.01% -0.93% -1.70% Portfolio B 0.00% 6.67 5.99 6.87 0.33 -1.24 3 4.93 4.76 1.88 -1.47 0.38 4 1.21 0.34 0.59 0.18 5 -1.99 -3.70 4.21 -1.66 2.30 -2.86 2.77 6 4.26 -3.33 -1.51 7 -0.69 -2.41 -2.62 -4.44 -5.84 -1.79 5.69 8 -15.41 -15.41 6.04 -16.08 5.92 9 4.13 0.03 -3.83 10 7.01 -3.31 6.75 5.57 4.99 -2.90 -3.72 11 5.85 1.41 12 -0.31 -4.98 6.01 3.51 13 2.81 1.25 7.68 7.80 9.60 5.16 -3.28 5.43 2.48 -2.85 6.59 -6.06 1.73 14 -0.57 -4.09 -5.50 15 3.25 -3.92 -3.05 16 4.40 2.96 2.77 2.53 7.30 0.07 3.75 17 -2.39 3.07 3.53 3.43 18 4.71 -4.30 19 -3.27 1.97 20 -1.15 -0.50 -4.09 0.09 -3.44 -1.32 -2.61 -1.20 0.66 -1.16 -3.23 21 -1.56 3.24 22 5.34 5.72 -3.15 -6.47 7.71 3.21 23 24 6.11 1.97 7.26 -4.90 2.24 7.03 -8.10 -9.01 7.78 6.98 25 -4.33 4.00 -2.87 -2.09 21.44 26 27 1.04 8.97 2.57 5.21 -0.25 -11.98 7.89 5.24 -16.72 28 -4.30 -2.93 -6.15 -7.56 8.63 29 -4.22 -3.34 3.79 -0.66 1.73 -5.81 13.23 5.30 -8.81 30 4.77 Using regression analysis, calculate the factor betas of each stock associated with each of the common risk factors. Which of these coefficients are statistically significant at 5% level of significance? Fill in the table below. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers for factor betas to three decimal places and answers for t-statistics to two decimal places. bi t-statistic Significance Regression for Portfolio A Constant -Select- Factor 1 -Select- Factor 2 -Select- Factor 3 3 -Select- Regression for Portfolio B Constant -Select- Factor 1 -Select- Factor 2 -Select- Factor 3 -Select- b. How well does the factor model explain the variation in portfolio returns? On what basis can you make an evaluation of this nature? The factor models explain -Select- as the -Select v values in both regressions are -Select- c. Suppose you are now told that the three factors used in the models represent the risk exposures in the Fama-French characteristic-based model (i.e., excess market, SMB, and HML). Based on your regression results, which one of these factors is the most likely to be the market factor? Explain why. ... -Select- v is the most likely candidate for the market factor, because it has a -Select- effect on both portfolios. d. Suppose it is further revealed that Factor 3 is the HML factor. Which of the two portfolios is most likely to be a growth-oriented fund and which is a value-oriented fund? Explain why. is the more likely candidate for the value-oriented portfolio as it has a -Select- v loading on this factor. - -Select- -Select is the more likely candidate for the growth-oriented portfolio as it has a -Select- loading on this factor