7. Based on the information in the table below, which displays the output from an estimation...

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7. Based on the information in the table below, which displays the output from an estimation of the Fama French 3-factor model for Costco (COST), answer the following questions. Regression Statistics Multiple R 0.761994536 R Square 0.580635673 Adjusted R Square 0.557761255 Standard Error 0.042375482 Observations 59 Standard Coefficients Error Intercept Mkt-RF 0.011013871 0.00556371 0.821283037 0.104621045 t Stat P-value 1.979590961 0.052762964 7.850074887 1.53138E-10 SMB HML -0.593354081 0.213312833 -2.781614558 0.00739452 -0.542393384 0.125095949 -4.335818925 6.24071E-05 a. Describe the Fama French SMB factor. How is it constructed? What is it trying to measure? b. What is the coefficient on the Fama French SMB factor? Is it statistically significant (assume a significance level of 5%)? How do you know? c. Describe what the HML factor is and what does it measure. Calculate the book to market ratio of COST. The 30th and 70th percentile break points for B/M ratio are 0.219 and 0.64 respectively. Based on what you know about COST, would you expect COST to have a positive or negative coefficient estimate on the Fama French HML factor? Why? 7. Based on the information in the table below, which displays the output from an estimation of the Fama French 3-factor model for Costco (COST), answer the following questions. Regression Statistics Multiple R 0.761994536 R Square 0.580635673 Adjusted R Square 0.557761255 Standard Error 0.042375482 Observations 59 Standard Coefficients Error Intercept Mkt-RF 0.011013871 0.00556371 0.821283037 0.104621045 t Stat P-value 1.979590961 0.052762964 7.850074887 1.53138E-10 SMB HML -0.593354081 0.213312833 -2.781614558 0.00739452 -0.542393384 0.125095949 -4.335818925 6.24071E-05 a. Describe the Fama French SMB factor. How is it constructed? What is it trying to measure? b. What is the coefficient on the Fama French SMB factor? Is it statistically significant (assume a significance level of 5%)? How do you know? c. Describe what the HML factor is and what does it measure. Calculate the book to market ratio of COST. The 30th and 70th percentile break points for B/M ratio are 0.219 and 0.64 respectively. Based on what you know about COST, would you expect COST to have a positive or negative coefficient estimate on the Fama French HML factor? Why?

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Steps Step 1 of 2 a The Fama French SMB factor is a factor that captures the excess returns of smallcap stocks over largecap stocks It is constructed ... View the full answer