Reference no: EM132411530
Assignment - Evaluating Portfolios
a) Use the yahoo finance mutual fund screener to select mutual funds for this assignment. We study large cap equities for this project. Set the filters as in the following image, and click on "Find Mutual Funds".
The list should include many funds from all major investment management companies. You can see multiple funds associated with each investment management company. For example, John Hancock has 4 listed funds with tickers JRLAX, JTAIX, JCLAX, JILAX. Similarly, JPMorgan, Goldman Sachs, Principal Advisors, Manning & Napier, etc. all have multiple funds.
Pick three funds associated with one investment management company. We want funds that have at least 5 years of data. You can look in each funds yahoo finance page for an "inception date" that is older than 5 years.
b) Download monthly price data for the tickers you selected for the past 5 years. Compute monthly returns using Adjusted Close Prices. Create a table of summary statistics for each fund. Also, download monthly data for factors (the three-factor model) from Ken French website. Your summary statistics should contain Mean, SD, Skewness, and Sharpe ratio.
c) Run CAPM regression (a single-factor model regressions) for each fund:
rFund - rrf = αFund + βFund(MKT - rrf) + εFund
That is, regress excess fund returns on excess market returns and find the coefficient on MKTRF and the intercept. The coefficient is the fund's beta and this intercept is CAPM alpha. Beta is a proxy of risk (aggressive vs defensive) and alpha is a proxy for performance. Report the betas and Jensen's alphas with their associated t-statistics.
d) Run the three-factor model regression for each fund:
rFund - rrf = αFund + βMKT(MKT - rrf) + βSMB(SMB) + βHML(HML) + εFund
And record the estimates.
You have now run 6 regressions (3*2), report your results in one table. Your table should contain: estimates of intercept (alpha) and slopes (exposure or beta estimates), along with their t-statistics, as well as the R2 for each regression. Add a comment section to the table and discuss each fund's style and performance.
Attachment:- Assignment File.rar
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