1.Using monthly log return data over the last ten years, a researcher uses Ordinary Least Squares regression analysis to estimate a regression model of the TESCO stock return on the FTSE100 Index return, the Sainsbury return and the ASDA return. The following estimated equation is reported (the standard errors are given in brackets).

(0.004978)(0.1283)(0.07709)(0.0572)

where the number of observations is 120 and R² = 0.2796.

a)Using the conventional testing procedures and statistical tables provided:

i)Test the significance of the partial slope coefficients estimated by the model.

(20 marks)

ii)Test the overall significance of the model. (20 marks)

b)Interpret the estimated model and comment on the results.(20 marks)

c)A second version of the model is also estimated in which SAINS and ASDA have been removed from the regression. This model gives the estimated equation:

(0.00273)(0.1733)

where R² = 0.2136

i)Explain how you would test for the restrictions on the parameters of the first version of the model, using the first and the second versions of the model regression results. Stating the null and alternative hypotheses of your test, carry out an appropriate test to identify the preferred model. (20 marks)

Explain what is meant by dummy variables and how you would use a dummy variable to examine the impact of Brexit referendum in June 2016 on TESCO's stock return.