Using the data employed by Clare and Thomas (1995), suppose you are interested in analyzing whether there are quarterly return differences between the loser and winner portfolios

Economics Nov 25, 2020

Using the data employed by Clare and Thomas (1995), suppose you are interested in analyzing whether there are quarterly return differences between the loser and winner portfolios. You
(e) Can one run the following regression RD, = BiQing +u4 (B1-5) i=1 to analyse whether there are quarterly return differences between the loser and winner portfolio? Explain. [2]

Expert Solution

Answer:-

Yes, this regression can help analyse that there are quaterly return differences between the loser and winner portfolio.
This can be done by defining

β as the sensitivity of the return of the difference between loser and winner portfolio with respect to time

and

Q_??????i,t as the return of the difference between the loser and winner portfolio.

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