Homework answers / question archive /
A researcher would like to know whether there is a day of the week effect in the returns on a stock

#### A researcher would like to know whether there is a day of the week effect in the returns on a stock

######
Economics

Share With

A researcher would like to know whether there is a day of the week effect in the returns on a stock. The researcher decides to estimate (if possible) the following three regressions: r; = B duml, + B,dum2, + B,dum3, + B dum4, + B dum5, +u, (1) , = B duml, + B dum2, +B_dum3, + B.dum4, +B;dum5, + Be +u, (2) r; = B duml, + B?dum2, + B?dum3, + B.dum4, + Be +u, (3) The variables are: r; is the return on the stock, duml takes the value 1 for a Monday return and zero otherwise, dum2 takes the value 1 for a Tuesday return and zero otherwise, dum3 takes the value 1 for a Wednesday return and zero otherwise, dum4 takes the value 1 for a Thursday return and zero otherwise, and dum5 takes the value 1 for a Friday return and zero otherwise. By is a constant term and u, is the regression residual. Is it the case that? Select one: A. Only regression (1) can be estimated O B. Only regression (3) can be estimated C. Only regression (1) and (3) can be estimated O D. Only regression (2) can be estimated E. Only regression (1) and (2) can be estimated