Question 1(1 point)

Violating the assumption of homoscedasticity of the errors in a linear regression model implies

Question 1 options:

1)

the OLS coefficient estimates and standard errors are correct

2)

the OLS coefficients are correct, but standard errors are too big

3)

the OLS coefficient estimates and standard errors are incorrect

4)

the OLS coefficients are correct, but standard errors are too small

Question 2(1 point)

You estimate a regression to investigate the effect of firm-specific factors on the returns of a sample of 200 firms and obtain the following results with standard errors in parenthesis

,(3)

In whichis the annual return for the stock,is the size of firmmeasured in terms of sales revenue,is the market to book ratio,is the price/earnings ratio,is the stock's CAPM beta

Which variables should be excluded from the model (3)

Question 2 options:

1)

PE, BETA and the constant

2)

MB, PE and BETA

3)

PE and BETA

4)

MB, PE and BETA and the constant

Question 3(1 point)

Which of the following models is stationary?

Question 3 options:

1)

2)

3)

4)

Question 4(1 point)

Following Jensen (1968), suppose you want to test whether a given mutual fund provides consistently higher returns than those implied by the Capital Asset Pricing Model (CAPM) given the returns of the mutual fund, the market returns, and the risk-free rate. An estimate of CAPM is defined by

Question 4 options:

1)

returns of the mutual fund

2)

the market returns

3)

the risk-free rate

4)

all of the abov