Hi
I need help with the two questions attached. What do I need to look at to test the significance of coefficients at the 5% level. Also, in regards to the second question, could anyone help me out? I've attached my eViews output for the regression as well.
Any help is much appreciated
Regards
Winston
Regression Model and statistical significance
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Regression Model and statistical significance
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- hitecreg.PNG (17.94 KiB) Viewed 8571 times
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- q1&2.PNG (67.67 KiB) Viewed 8571 times
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- Non-normality and collinearity are NOT problems!
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Re: Regression Model and statistical significance
If you want help with your homework, you're going to have to tell us what you've done so far and where you're stuck.
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Re: Regression Model and statistical significance
These are the answers I put for Q1 and Q2
1.As the absolute value of the t-statistic for all the coefficients of the factors is greater than the critical value of 1.960, we reject the null hypothesis are not significantly different than zero at the 5% significance level. We conclude that the estimated coefficients are all statistically significant at the 5% level.
2. The hml factor typically has a positive sign and represents the difference in returns between companies with a high book-to-value ratio and a low book-to-value ratio. The smb factor typically has a positive value as small-cap companies generate higher returns than large-cap companies. The cma factor typically has a negative value as it is the difference between the returns of companies that invest conservatively versus those that invest aggressively.
The hml factor has a coefficient of -0.397031, which means that the portfolio is weighted more towards firms with a low book-to-value ratio.
The smb factor has a coefficient of 0.301440 which means that the portfolio is weighted more towards small-cap stocks.
The cma factor has a coefficient of -0.431019 which means that the portfolio is weighted more towards aggressive and high risk investments.
1.As the absolute value of the t-statistic for all the coefficients of the factors is greater than the critical value of 1.960, we reject the null hypothesis are not significantly different than zero at the 5% significance level. We conclude that the estimated coefficients are all statistically significant at the 5% level.
2. The hml factor typically has a positive sign and represents the difference in returns between companies with a high book-to-value ratio and a low book-to-value ratio. The smb factor typically has a positive value as small-cap companies generate higher returns than large-cap companies. The cma factor typically has a negative value as it is the difference between the returns of companies that invest conservatively versus those that invest aggressively.
The hml factor has a coefficient of -0.397031, which means that the portfolio is weighted more towards firms with a low book-to-value ratio.
The smb factor has a coefficient of 0.301440 which means that the portfolio is weighted more towards small-cap stocks.
The cma factor has a coefficient of -0.431019 which means that the portfolio is weighted more towards aggressive and high risk investments.
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- Non-normality and collinearity are NOT problems!
- Posts: 3779
- Joined: Wed Sep 17, 2008 2:25 pm
Re: Regression Model and statistical significance
Seems sensible.
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- Joined: Mon Dec 14, 2020 9:26 am
Re: Regression Model and statistical significance
Hi Winston, check this video tutorial that teaches you the regression outputs https://youtu.be/DwH8lFUrhxs
Good luck!
Good luck!
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