Question

A financial analyst would like to determine whether the return on Fidelity’s Magellan mutual fund varies depending on the quarter; that is, if there is a seasonal component describing return. He collects 10 years of quarterly return data. A portion is shown in the accompanying table; the entire data set, labeled Magellan_dummy, can be found on the text website.


a. Estimate y = β0 + β1d1 + β2d2 + β3d3 +  where y is Magellan’s quarterly return, d1 is a dummy variable that equals 1 if quarter 1 and 0 otherwise, d2 is a dummy variable that equals 1 if quarter 2 and 0 otherwise, and d3 is a dummy variable that equals 1 if quarter 3 and 0 otherwise.
b. At the 10% significance level, can we conclude that Magellan’s stock return varies by season?Explain.


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  • CreatedJanuary 28, 2015
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