Reading 38

Question 19 on page 207 of CFAI Equity textbook: I am not able to figure this question correctly. Specifically, how did they do the estimation of alpha, beta1 and beta2? Any help would be appreciated. p.s. Wish you all happy festive season!

Didn’t do that reading yet but got look @ the book now - as far as I can see from the solution they ran a multiple regression analysis based on 2 factors (done with Excel) - highly doubt this will be asked in the exam

I came here because of this exact same question. CFAI provides an answer based on implicit assumption that the candidate has already mastered Multiple Regression to the granular detail, providing no explanation whatsoever for the ‘solution’ provided. I’m assuming that we are supposed to run a t-test for a 2-factor regression, then arrive at alpha, beta1, and beta2. If anyone has worked through this, I would be greatly appreciative of a better explanation than what is in the text! Thanks in advance :slight_smile: