Testing the Significance of Dividend Yield in Regression

A financial analyst is conducting a multiple regression analysis to understand the factors affecting the stock returns of a specific sector. The model includes the independent variables: market return (MR), dividend yield (DY), and interest rates (IR). The estimated regression equation is:

$$ ext{Return} = eta_0 + eta_1 ext{MR} + eta_2 ext{DY} + eta_3 ext{IR} + u$$

The analyst wants to test the null hypothesis that the dividend yield does not significantly affect stock returns. The null hypothesis can be expressed as:

$$H_0: eta_2 = 0$$

The analyst finds a t-statistic for $eta_2$ of 1.76 and a critical value of 1.96 for a significance level of 0.05 (two-tailed). Based on this analysis, the analyst must decide whether to reject the null hypothesis.