Multiple Linear Regression 02 – ANOVA

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:

SourcedfSSMSFSignificance F
Regression45236.6351309.16131.0000.000
Residual91909.4139.994
Total956146.048

The AIC and BIC for the model are 23.899 and 26.523 respectively.