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You are investigating the one portfolio's systematic risk using CAPM (Capital Asset Pricing Model). The data contains weekly excess returns for one portfolios of stocks
You are investigating the one portfolio's systematic risk using CAPM (Capital Asset Pricing Model). The data contains weekly excess returns for one portfolios of stocks (named ret.ex) and the excess return on the market portfolio (named miktax). The sample size is 100. The regression results in the following output (values in parentheses are standard errors): ret_ex = -0.07 + 1.16 X mkt_ex, R2 = 0.46, SER = 1.4 (0.03) _(0.01) a) How would you interpret the estimated values of the intercept and slope coefficients? (10 marks) b) Calculate the t-statistics of the two coefficients and use them to determine whether the coefficients are statistically significantly different from zero at a 5% significance level. Clearly show how you reach your conclusions. (15 marks) c) What is the predicted value of the dependent variable if makt.ex=0.1? (10 marks) d) You extend the original model above by including two additional independent variables, SMB (size-minus-big) and HML (high-minus-low). The R-squared of the new regression model is 0.69. Use this information to test the null hypothesis that coefficients the two new variables are jointly statistically insignificant using the F-test. Clearly state the null and alternative hypotheses, the value of the F-statistic and the critical value you use. (15 marks) You are investigating the one portfolio's systematic risk using CAPM (Capital Asset Pricing Model). The data contains weekly excess returns for one portfolios of stocks (named ret.ex) and the excess return on the market portfolio (named miktax). The sample size is 100. The regression results in the following output (values in parentheses are standard errors): ret_ex = -0.07 + 1.16 X mkt_ex, R2 = 0.46, SER = 1.4 (0.03) _(0.01) a) How would you interpret the estimated values of the intercept and slope coefficients? (10 marks) b) Calculate the t-statistics of the two coefficients and use them to determine whether the coefficients are statistically significantly different from zero at a 5% significance level. Clearly show how you reach your conclusions. (15 marks) c) What is the predicted value of the dependent variable if makt.ex=0.1? (10 marks) d) You extend the original model above by including two additional independent variables, SMB (size-minus-big) and HML (high-minus-low). The R-squared of the new regression model is 0.69. Use this information to test the null hypothesis that coefficients the two new variables are jointly statistically insignificant using the F-test. Clearly state the null and alternative hypotheses, the value of the F-statistic and the critical value you use. (15 marks)
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