rpillar’s stock plunged dramatically. Monthly data for Caterpillar’s risk-adjusted return (R − Rf) and the risk-adjusted market return (RM − R
Caterpillar, Inc., manufactures and sells heavy construction equipment worldwide. The performance of Caterpillar’s stock is likely to be strongly influenced by the economy. For example, during the Great Recession, the value of Caterpillar’s stock plunged dramatically. Monthly data for Caterpillar’s risk-adjusted return (R − Rf) and the risk-adjusted market return (RM − Rf) are collected for a five-year period (n = 60). A portion of the data is shown in the accompanying table. (You may find it useful to reference the t table.)
| Month | Year | R_Rf | RM_Rf |
| Jan | 2012 | 0.0510 | 0.0403 |
| Feb | 2012 | -0.0682 | 0.0304 |
| Mar | 2012 | -0.0360 | -0.0083 |
| Apr | 2012 | -0.1446 | -0.0635 |
| May | 2012 | -0.0318 | 0.0387 |
| Jun | 2012 | -0.0091 | 0.0117 |
| Jul | 2012 | 0.0188 | 0.0188 |
| Aug | 2012 | 0.0073 | 0.0232 |
| Sept | 2012 | -0.0154 | -0.0209 |
| Oct | 2012 | 0.0101 | 0.0018 |
| Nov | 2012 | 0.0504 | 0.0062 |
| Dec | 2012 | 0.1036 | 0.0497 |
| Jan | 2013 | -0.0619 | 0.0104 |
| Feb | 2013 | -0.0595 | 0.0350 |
| Mar | 2013 | -0.0273 | 0.0172 |
| Apr | 2013 | 0.0193 | 0.0202 |
| May | 2013 | -0.0390 | -0.0154 |
| Jun | 2013 | 0.0046 | 0.0490 |
| Jul | 2013 | 0.0021 | -0.0317 |
| Aug | 2013 | 0.0100 | 0.0293 |
| Sept | 2013 | -0.0007 | 0.0444 |
| Oct | 2013 | 0.0215 | 0.0275 |
| Nov | 2013 | 0.0727 | 0.0229 |
| Dec | 2013 | 0.0334 | -0.0363 |
| Jan | 2014 | 0.0389 | 0.0427 |
| Feb | 2014 | 0.0242 | 0.0064 |
| Mar | 2014 | 0.0602 | 0.0057 |
| Apr | 2014 | -0.0247 | 0.0207 |
| May | 2014 | 0.0627 | 0.0188 |
| Jun | 2014 | -0.0733 | -0.0155 |
| Jul | 2014 | 0.0891 | 0.0374 |
| Aug | 2014 | -0.0924 | -0.0158 |
| Sept | 2014 | 0.0238 | 0.0230 |
| Oct | 2014 | -0.0006 | 0.0243 |
| Nov | 2014 | -0.0904 | -0.0044 |
| Dec | 2014 | -0.1266 | -0.0313 |
| Jan | 2015 | 0.0448 | 0.0546 |
| Feb | 2015 | -0.0348 | -0.0176 |
| Mar | 2015 | 0.0853 | 0.0082 |
| Apr | 2015 | -0.0100 | 0.0103 |
| May | 2015 | -0.0061 | -0.0212 |
| Jun | 2015 | -0.0732 | 0.0195 |
| Jul | 2015 | -0.0292 | -0.0629 |
| Aug | 2015 | -0.1368 | -0.0271 |
| Sept | 2015 | 0.1165 | 0.0828 |
| Oct | 2015 | 0.0063 | 0.0003 |
| Nov | 2015 | -0.0658 | -0.0187 |
| Dec | 2015 | -0.0865 | -0.0530 |
| Jan | 2016 | 0.0987 | -0.0067 |
| Feb | 2016 | 0.1275 | 0.0629 |
| Mar | 2016 | 0.0125 | -0.0002 |
| Apr | 2016 | -0.0602 | 0.0130 |
| May | 2016 | 0.0428 | -0.0018 |
| Jun | 2016 | 0.0890 | 0.0329 |
| Jul | 2016 | -0.0032 | -0.0042 |
| Aug | 2016 | 0.0802 | -0.0042 |
| Sept | 2016 | -0.0627 | -0.0223 |
| Oct | 2016 | 0.1518 | 0.0309 |
| Nov | 2016 | -0.0340 | 0.0137 |
| Dec | 2016 | 0.0264 | 0.0128 |
a. Estimate the CAPM model for Caterpillar, Inc. (Round your answers to 2 decimal places.)
R-Rf= + (Rm-Rf)
b-2. Calculate the value of the test statistic. (Round your answer to 4 decimal places.)
Test statistic=
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