Consider a set of equity returns from four different markets across 12 different periods. The data are available in the marketdata.txt Define the forth variable as your response variable (Y). Define the following three models: Model 1 . Model 2 . Model 3 Y₁ = Bo + Biu+E; Y₁ = Bo + B₂x2 + Ei Y₁ = Bo + Bau +₂21 + 1 Mkt 1 Mkt 2 Mkt_3 Mkt_4 0.0083 0.0427 -0.0179 -0.0039 -0.0012 -0.0372 0.0090 -0.0026 -0.0549 -0.0521 -0.0462 -0.0567 0.0275 -0.0626 0.0338 0.0140 -0.0568 -0.0737 -0.0521 -0.0505 -0.0370 -0.0160 -0.0234 -0.0266 0.0575 0.0508 0.0603 0.0548 0.0103 -0.0138 0.0237 0.0147 0.0069 -0.0017 0.0038 -0.0010 -0.0403 -0.0326 -0.0304 -0.0259 0.0054 0.0222 0.0142 0.0137 0.0303 0.0947 0.0295 0.0299 (a) What could you say about the significance of the parameters in the three models? (b) Are the data satisfying the normality assumption in each model?

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Consider a set of equity returns from four different markets across 12 different periods.
Mkt_1 Mkt_2
0.0083 0.0427 -0.0179 -0.0039
-0.0012 -0.0372 0.0090 -0.0026
-0.0549 -0.0521 -0.0462 -0.0567
0.0275 -0.0626 0.0338 0.0140
-0.0568 -0.0737 -0.0521 -0.0505
-0.0370 -0.0160 -0.0234 -0.0266
Mkt_3
Mkt_4
The data are available in the marketdata.txt
Define the forth variable as your response variable (Y). Define the
following three models:
0.0575 0.0508 0.0603 0.0548
0.0103
0.0069 -0.0017 0.0038 -0.0010
-0.0403 -0.0326 -0.0304 -0.0259
0.0054 0.0222 0.0142 0.0137
0.0303 0.0947 0.0295 0.0299
-0.0138 0.0237 0.0147
• Model 1 Y, Bo+Bixu+e;
Model 2 Y; = Bo+ B2a2i+ EI
• Model 3 Y, = Bo+ B1xi+ B2x21+ E,
(a) What could you say about the significance of the parameters in the three models?
(b) Are the data satisfying the normality assumption in each model?
Transcribed Image Text:Consider a set of equity returns from four different markets across 12 different periods. Mkt_1 Mkt_2 0.0083 0.0427 -0.0179 -0.0039 -0.0012 -0.0372 0.0090 -0.0026 -0.0549 -0.0521 -0.0462 -0.0567 0.0275 -0.0626 0.0338 0.0140 -0.0568 -0.0737 -0.0521 -0.0505 -0.0370 -0.0160 -0.0234 -0.0266 Mkt_3 Mkt_4 The data are available in the marketdata.txt Define the forth variable as your response variable (Y). Define the following three models: 0.0575 0.0508 0.0603 0.0548 0.0103 0.0069 -0.0017 0.0038 -0.0010 -0.0403 -0.0326 -0.0304 -0.0259 0.0054 0.0222 0.0142 0.0137 0.0303 0.0947 0.0295 0.0299 -0.0138 0.0237 0.0147 • Model 1 Y, Bo+Bixu+e; Model 2 Y; = Bo+ B2a2i+ EI • Model 3 Y, = Bo+ B1xi+ B2x21+ E, (a) What could you say about the significance of the parameters in the three models? (b) Are the data satisfying the normality assumption in each model?
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