Question: Q5. There are two regressions: rt = a + brM't + at (1) rt 2 c + drug + eVott + v; (2) where 3*}

Q5. There are two regressions: rt = a + brM't + at (1) rt 2 c + drug + eVott + v; (2) where 3*} is stock returns, TM; is market returns, and Volt is market volatility. State the null hypothesis if regression (l) is nested in regression (2). Q5. Holding other things constant, what is the effect of (a) sample size and (h) variation in x on the variance of the OLS estimator? [2]

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