Suppose that your assistant has run a market model regression for a company that produces sophisticated drilling machines, and finds the following results (t statistic in parentheses) Your assistant remarks that, as the estimated beta is insignificant, the true beta is zero The exposure, in contrast, is significant, and must be equal to the estimated coefficient How do you react fj a m ys j, j 0 002 0 56 m 4 25 j (0 52) (1 25) (2 06)

Question: Suppose that your assistant has run a market-model regression for a company that produces sophisticated drilling machines, and finds the following results (t-statistic in parentheses):

Suppose that your assistant has run a market-model regression for a company that produces sophisticated drilling machines, and finds the following results (t-statistic in parentheses):

fj= a+ ßř m + ys + ẽ j, řj = 0.002 + 0.56 ĩm+ 4.25 š + ě j. (0.52) ... (1.25) ... (2.06)

Your assistant remarks that, as the estimated beta is insignificant, the true beta is zero. The exposure, in contrast, is significant, and must be equal to the estimated coefficient. How do you react?

fj= a+ m + ys + j, j = 0.002 + 0.56 m+ 4.25 + j. (0.52) ... (1.25) ... (2.06)

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