Estimate a multiple linear regression relationship with the U.K. stock returns as the dependent variable, and U.K. Corporate Bond yield (Interest rate), U.S. Stock Returns, and Japan Stock Returns as the independent variables using the monthly data covering the sample period 1980-2017 (Finding the determinants of U.K. stock returns).

Show the estimated regression relationship

Conduct a t-test for statistical significance of the individual slope coefficients at the 1% level of significance. Provide the interpretation of the significant slope estimates.

Conduct a test for the overall significance of the regression equation at the 1% level of significance. (Test for the significance of the regression relationship as a whole)

Present the R-Square (Coefficient of Determination) and its interpretation.

Solution:

First, we need to obtain the Excel print out using the data in Table GFD Final Monthly Returns.

1% level of significance in both t tests and the F test.

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.735992889
R Square	0.541685532
Adjusted R Square	0.538636877
Standard Error	3.523412257
Observations	455
ANOVA
	df	SS	MS	F	Significance F
Regression	3	6617.396126	2205.798709	177.6801681	4.89572E-76
Residual	451	5598.909705	12.41443393
Total	454	12216.30583

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 99.0%	Upper 99.0%
Intercept	0.115186435	0.17010687	0.677141581	0.498663306	-0.219114035	0.449486905	-0.324841646	0.555214515
RSUS	0.730332455	0.041983928	17.39552475	3.10678E-52	0.647824048	0.812840861	0.621729509	0.8389354
RSJA	0.209729348	0.029769306	7.045154189	6.96789E-12	0.15122558	0.268233116	0.132722873	0.286735823
RUK	0.113600031	0.030384391	3.738762846	0.000208723	0.053887475	0.173312588	0.03500247	0.192197593

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