(d) Now define a fourth quarter dummy as 04, =1 if return is in the fourth quarter and 0 otherwise. Suppose you drop the first quarter dummy from regression (B2-2) and include the fourth quarter dummy instead such that RD, = a+ Be, + B, Q2, + B,Q,, te,. (B2-3) What will the estimated value of a, BA , B2 , B, now be? [4] (e) Suppose you run an additional regression: RD1 = atu, . (B2-4) For this regression, the RSS=720. The sample consists of 420 observations. Use the critical value for the F-distribution, F(3,416)=2.60. The formula for the F-test is F= (RRSS - URSS) / m URSSIT - K With this information, formulate and test the hypothesis of no quarterly return differences between the loser and winner portfolio at 5% level of significance. [4] (f) Can one run the following regression (B2-5) 1=1 to analyse whether there are quarterly return differences between the loser and winner portfolio? Explain. [4] (g) Referring to part (b), suppose the differences between the loser and winner portfolio may differ prior to the black Monday crisis on October 19, 1987 when stock markets around the world crash. You plan to run a CAPM regression to test whether there is structural stability in the coefficient estimates of the regression. Explain how you can perform a Chow test to determine the presence of structural stability. [6]