Suppose that the stock market can be described by the Fama and French (1993) factors. The factor risk premiums are in the following table: SMB HML Portfolio Risk premium Market index 0.027 0.062 -0.066 According to the APT the expected return on a stock is given by the following equation: E(ri) = rf + BiMRM + BiSMBSMB + BiHMLHML You want to make an analysis on Amazon Inc. stock return. The regression result of Amazon daily return data (Jan '18 - Jun '18, 125 observations) on the above factors is on the following table: COEFFICIENT P-VALUE CONSTANT 0.0184 0.8478 MARKET 1.0082 0.000 SML -0.0711 0.7273 HML -0.7147 0.0039 R 0.54 Risk free rate in the economy is 0.006. Apple's risk premium is 0.0836 (a) Is Amazon Inc fairly priced according to FF3? (5 marks) (b) In what percentage does the above model explain the variation of amazon daily stock returns? (5 marks) (c) Are there any statistically insignificant factors from the regression result? What would be the expected return and alpha of amazon if you exclude those factors from the analysis