The Fama French three factor model attempts to explain stock returns. The regression model and output are shown below. Use these to answer the questions. Rpe Rjt = a + Bpt * (Rme Rre) + Spe * SMB: + hpe * HML+ R is the stock return SMB is the stock return of small minus big size portfolio HML is the stock return of the high minus low value portfolio The subscripts are: Portfolio:p Time: t Risk free asset: f Market portfolio: m The tables in Appendix 1 give the regression output. Use the regression output to answer the following: (a) In general how successful is the model in explaining stock returns? (b) Which variables are significant at the 10%, 5% and 1% level? (c) What is the 95% confidence interval for the SMB variable? (d) What is the slope coefficient of the HML variable? (e) If the Rm - RF, SMB and HML variables are 4%, 2%, and 3% respectively, how much is the expected excess return of that portfolio? SUMMARY OUTPUT Regression Statistics Multiple R 0.8878 R Square 0.7882 Adjusted R Square 0.7864 Standard Error 3.0641 Observations 360 ANOVA MS 4145.49 df 3 356 359 Significance F F 441.55 1.41 E-119 Regression Residual Total SS 12436.46 3342.32 15778.78 9.39 Intercept Rm-Rf SMB HML Coefficients -0.4727 1.1410 0.8937 Standard Error 0.1653 0.0382 0.0542 0.0570 t Stat P-value -2.8594 0.0045 29.8525 6.0475 E-99 16.5014 7.7749 E-46 10.1208 2.5047 E-21 Lower 95% -0.7967 1.0661 0.7876 0.4656 Upper 95% -0.1487 1.2159 0.9999 0.6892 0.5774