You estimate a Fama-French 3-factor model and obtain the following results:

Dependent Variable: RETURN

Method: Least Squares

Date: XXXXTime: 22:10

Sample: 1985M01 2020M06

Included observations: 426

Variable

Coefficient

Std. Error

t-Statistic

Prob.

C

-0.653930

0.440713

-1.483799

0.1386

MKT

0.976693

0.100942

9.675791

0.0000

SMB

1.158154

0.149614

7.740924

0.0000

HML

-0.000415

0.150694

-0.002756

0.9978

R-squared

0.325281

Mean dependent var

0.087371

Adjusted R-squared

0.320485

S.D. dependent var

10.88139

S.E. of regression

8.969826

Akaike info criterion

7.234955

Sum squared resid

33953.19

Schwarz criterion

7.273025

Log likelihood

-1537.045

Hannan-Quinn criter.

7.249993

F-statistic

67.81522

Durbin-Watson stat

2.089725

Prob(F-statistic)

0.000000

where: RETURN is the monthly stock excess return of a firm, MKT is market risk premium, SMB is size premium, and HML is value premium, all in percentages.

a)Interpret the estimated coefficient of MKT. How can you conclude the riskiness of the stock? [5 marks]

The co-efficient of MKT

b) On the basis of statistical significance, which variable(s) would you consider deleting from the regression? Explain your answer. [5 marks]

c) Holding other factors fixed, if the SMB increased from 1% to 1.2%, what would be the expected effect on the stock excess return? [5 marks]

d) Is the model overall statistically significant? Explain your answer. [5 marks]

e) Calculate the 95% confidence interval for the coefficient of MKT, using the 5% critical value of 1.96. [5 marks]