You are a financial analyst at an investment firm. Your manager asks you to analyze the performance drivers for one of the firm’s portfolios. He asks you to construct a regression model of the portfolio’s monthly excess returns (RET) against four factors: the market excess return (MRKT), a size factor (SMB), a value factor (HML), and the monthly percentage change in a bond index (BOND).
You collect the data and run the regression. The resulting model is:
RETᵢ = β₀ + β₁MRKTᵢ + β₂SMBᵢ + β₃HMLᵢ + β₄BONDᵢ + εᵢ.
The ANOVA table for the model is as follows:
Source | df | SS | MS | F | Significance F |
---|---|---|---|---|---|
Regression | 4 | 5236.635 | 1309.16 | 131.000 | 0.000 |
Residual | 91 | 909.413 | 9.994 | ||
Total | 95 | 6146.048 |
The AIC and BIC for the model are 23.899 and 26.523 respectively.