Question: Suppose that the following model Rt = 1 + 2 M K Tt + 3 S M Bt + 4 H M Lt + 5

Suppose that the following model Rt = 1 + 2 M K Tt + 3 S M Bt + 4 H M Lt + 5 M OMt + ut has been estimated using 120 monthly observations. s are coefficients. (a) Assuming that we are interested in detecting whether there is heteroscedasticity in the error term ut . Please write out the auxilary regression equation for this test. (b) Assuming that the R obtained from the auxiliary regression is 0.045. Perform theheteroscedasticity test at 5% significance level. What is your conclusion? (The 5% critical value from the table is 11.07.)

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