Problem 3 Fama and French (1992) 1 develop a three-factor model by adding two other variables on the basis of the CAPM. The model is where R is the returns of an individual financial asset (i.e. a stock or a portfolio), RM is the market return (such as the S&P 500s return as we used in the CAPM), SMB is the Small (market capitalization) Minus Big, and the HML is the High (book-to-market ratio) Minus Low. Here RM, SMB, and HML are the three factors. This is a typical multiple linear regression model. This three-factor model can be used in the mutual fund industry to explain the return of an individual asset by the three factors. Please use the date below to work on the following question.

Question: Using EXCEL, please run the estimation procedure for the above-mentioned three factor model, and illustrate your findings/comments based on the estimation of the model. Please specially pay attention to the R 2. Please show step by step on how to use excel to solve.

	R	RM	SMB	HML
197901	9.62	4.18	3.5	2.18
197902	-5.14	-3.41	0.43	1.14
197903	11.91	5.75	3.2	-0.61
197904	1.26	0.05	2.11	1.11
197905	-3.43	-2.18	0.12	1.24
197906	6.59	3.88	1.06	1.34
197907	1.8	0.73	1.32	1.77
197908	10.95	5.7	1.97	-1.6
197909	-1.47	-0.69	-0.29	-0.89
197910	-10.46	-8.14	-3.29	-1.89
197911	9.27	5.37	2.75	-3.24
197912	4.35	1.87	4.09	-2
198001	7.85	5.76	1.56	1.7
198002	-0.49	-0.79	-1.89	0.63
198003	-14.71	-13.23	-6.51	-1.04
198004	7.08	3.97	0.91	1.12
198005	7.93	5.2	2.06	0.35
198006	7.2	3.16	1.69	-0.87
198007	8.35	6.41	4.31	-6.21
198008	4.26	1.72	3.91	-2.55
198009	7.07	2.2	0.91	-4.6
198010	5.1	1.06	2.36	-2.92
198011	10.98	9.53	-3.38	-8.44
198012	-4.31	-4.75	-0.29	2.7
198101	-1.97	-5.05	2.96	6.79
198102	1.3	0.48	-0.32	1.05
198103	8.38	3.41	3.48	0.69
198104	2.01	-2.21	4.43	2.26
198105	5.38	0.21	2.03	-0.41
198106	-2.36	-2.37	-0.86	5.06
198107	-1.38	-1.55	-2.16	-0.6
198108	-8.95	-6.91	-1.92	4.78
198109	-8.19	-7.62	-2.65	5.18
198110	9.18	4.81	2.17	-4.09
198111	3.34	3.52	-1.01	1.87
198112	-3.41	-3.68	1.18	0.76
198201	-3.74	-3.42	-1.19	3.17
198202	-3.25	-6.03	0.53	6.05
198203	-0.98	-1.99	-0.18	3.84
198204	7.15	3.2	1.49	-2.78
198205	-3.99	-3.88	0.48	1.87
198206	-0.6	-3.35	-0.32	1.49
198207	-1.52	-3.1	0.93	0.18
198208	8.48	11.14	-4.13	1.15
198209	3.46	1.17	2.88	0.33
198210	13.79	11.27	2.3	-3.57
198211	10.26	4.56	4.7	-1.91
198212	2.59	0.78	-0.23	0.03
198301	5.38	3.5	2.63	-0.82
198302	5.5	2.4	3.18	0.76
198303	6.13	2.84	1.78	1.98
198304	9.8	6.71	0.46	0.7
198305	2.6	0.63	6.13	-1.52
198306	4.61	3.11	1	-3.83
198307	-4.21	-3.9	1.52	5.57
198308	-3	-0.41	-4.26	5.56
198309	2.59	0.85	0.57	0.99
198310	-5.11	-3.56	-3.56	4.9
198311	3.79	2.26	2.04	-0.78
198312	-2.29	-1.78	-0.29	1.77
198401	-1.67	-2.06	-0.39	7.63
198402	-7.2	-4.62	-1.66	3.47
198403	1.06	0.61	0.08	0.49
198404	-1.61	-0.56	-1.14	1.27
198405	-7.6	-6.01	0.06	0.27