1. Using the Regression tool in the Excel Data Analysis pack, run a CAPM model regression of the retail portfolio. CAPM requires just a single factor, the excess return on the market, as the independent variable. What is the beta of the retail portfolio?

2. Now, using the Regression tool, estimate the Fama-French three-factor model for the retail portfolio. It requires MKT-RF, SMB, and HML as the independent variables. What is the market beta estimated using the three-factor model?

3. What is the size beta estimated using the three-factor model?

4. Which of the coefficients appear significant in the three-factor model? Select all that apply.

coefficient on the market factor

coefficient on the value factor

coefficient on the size factor

intercept

5. Does the three-factor model explain the returns on the retail portfolio better than the single-factor CAPM model? If so, which statistic serves as the evidence?

Yes; Adjusted R-squared.

Yes; the t-statistics on the market factor.

Yes; the t-statistics on the value factor.

No

6. To prevent error carried forwards, assume that the coefficient on the HML is -0.5, and it is statistically significant. Based on this information, the retail portfolio exhibits the highest exposure to which category of stocks?

Small stocks

Large stocks

Value stocks

Growth stocks