a) Compare the corresponding estimated coefficients on the market risk premium (MKT_RF) in terms of their magnitude, sign, and significance in both regressions. Provide an economic explanation for your findings.

b) Compare the corresponding estimated coefficients on all the other factors in terms of their magnitude, signs, and significance in both regressions (i.e., compare the estimated coefficient on hml in the energy industry (ENRGY_RF) regression with that in the durable goods (DURBL_RF) regression. Do similarly for the estimated coefficients on smb, rmw and cma). What does this comparison suggest about the average characteristics of stocks in the energy and durable goods industries? (Hint: For example, are energy industry stocks value stocks on average, etc?)

c) Is the estimate of β1 statistically significant at the 5% level in each of the regressions? How do you interpret this result?

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aThe coefficients on MKTRF were statistically significant and had the expected signs in both regress... View the full answer