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A fund has changed managers twice during the past 10 years. An analyst wishes to measure whether either of the changes in managers has had an impact on performance. The analyst wishes to simultaneously measure the impact of risk on the fund’s return. R is the return on the fund, and M is the return on a market index. Which of the following regression equations can appropriately measure the desired impacts? A. R = a + bM + c1D1 + c2D2 + c3D3 + ε, where D1 = 1 if the return is from the first manager, and D2 = 1 if the return is from the second manager, and D3 = 1 is the return is from the third manager. B. R = a + bM + c1D1 + c2D2 + ε, where D1 = 1 if the return is from the first manager, and D2 = 1 if the return is from the third manager. C. The desired impact cannot be measured. |