XRAAPL t = ? + ?*XRMKT t + ? SMB *SMB t + ? HML *HML t + ? t From the parameter
ID: 2658898 • Letter: X
Question
XRAAPLt = ? + ?*XRMKTt + ?SMB*SMBt + ?HML*HMLt + ?t
From the parameter estimation, we have the following:
Variable - Parameter
Coefficients
Standard Errors
t-Statistics
Intercept - ?
1.2664
0.6423
1.9717
XRMKTt - ?
1.2546
0.1455
8.6218
SMBt - ?SMB
0.4690
0.2264
2.0718
HMLt - ?HML
-0.4428
0.1800
-2.4600
R2 0.2395 F-ratio 35.8988
Number of observations 346 Durbin-Watson 1.8911
1) 1nterpret the model from a financial perspective. That is, what are these four estimated coefficients telling you about Apple
Variable - Parameter
Coefficients
Standard Errors
t-Statistics
Intercept - ?
1.2664
0.6423
1.9717
XRMKTt - ?
1.2546
0.1455
8.6218
SMBt - ?SMB
0.4690
0.2264
2.0718
HMLt - ?HML
-0.4428
0.1800
-2.4600
Explanation / Answer
(1)The mode is
XRAAPLt = 1.2664+1.2546*XRMKTt+0.469* SMBt-0.4428*HMLt
Since the coefficient of variables of XRMKT and SMB are positive, it means that when the variables of XRMKT and SMB increases one unit, the variable of XRAAPL (i.e Apple
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