Describe the assumptions behind the classical linear regression model and the three diagnostic tests we discussed in class, the commands you would use in Stata to test each of them, how you would...

Describe the assumptions behind the classical linear regression model and the three diagnostic tests we discussed in class, the commands you would use in Stata to test each of them, how you would determine if they are violated, and what you can do to correct it if the assumption has been violated or the diagnostic indicates something may be unusually affecting the results of the regression.  Use the fund.dta data file to answer questions 2 & 3. Use the data as-is; do not transform any variables, winsorize, or remove outliers. The file contains the monthly returns of a two different funds the Long Fund and the Hedged Fund from the period January 1, 2001 to December 31, 2010 with the following variables: This is real performance data from exchange traded funds I was asked to analyze and perform these exact tests by the fund manager. Note the names have been changed to keep the funds anonymous.  Variable NameDescriptiondatelast trading day of monthlngretreturn of the Long Fundhdgretreturn of the Hedged Fundhedgeddummy variable =1 indicating that a hedging strategy was used that month =0 when not usedrfrisk-free return rate (one month treasury bill rate)mktrfexcess return on the marketsmbsmall-minus-big returnhmlhigh-minus-low returnumdmomentum factor  Perform an analysis of the Long Fund’s performance using the CAPM, Fama & French 3-factor, and Carhart 4-factor models. Calculate the annualized risk adjusted performance using the CAPM, Fama & French 3-Factor, and Carhart 4-Factor models. Determine if standard errors should be adjusted for the presence of heteroskedasticity using White’s test (estat hettest command in Stata) and indicate if the p-values are calculated using robust standard errors by placing/removing the asterisk after the p-value column heading. Round coefficient estimates to four decimal places (i.e. 0.12345 as 0.1236) and the p-value to three decimal places (i.e. 0.00005 as 0.000).  Complete the following...