CAPM 1) The Eurekahedge indices are a set of indices that track specific types of hedge funds. With the advent of Al, we have noticed a tight correlation with a boom in the semiconductor industry. In this exercise we want to evaluate and determine the factors that determine the returns generated by EHFI 683 (EHFI Al Data), an index specific to Al hedge funds and benchmarked against the Philadelphia Semiconductor Index (SOX) (20 pts): a) Using the excel formula, calculate the Beta of EHFI 683 to the SOX based on the CAPM. Interpret that result in one sentence. (5 pts) b) Now using the Covariance method, calculate the Beta of EHFI 867 to four decimal places. (5 pts) c) Perform a regression between EHFI 683 and the SOX. What is the adjusted R-squared? What does that imply? Is this what you would expect in the relationship between the two? (5 pts) d) Plot a scatter plot of the regression and include the equation and R squared value (5 pts):) Include your working excel workbook (required to get points) Fama French 2) Now let's test out the influence of the Fama French Factors (Fama French Data S24) on the EHFI 683 (EHFI Al Data) (20 pts) a) What is the adjusted R Squared for the regression between the Fama French Factors and EHFI 683? What does this imply? (5 pts) b) When comparing this to the CAPM regression what does that tell you? Why is one a better predictor than the other? (5 pts) c) Which of the Fama French Factors is statistically significant? Are the factors that are significant expected or are there any surprises in the magnitude or direction? (5 pts) d) What is the alpha for EHFI 867 (four decimal places)? (5 pts)e) Include your working excel workbook {(need to include to get any pts) Arbitrage 3) Walk me through an example of arbitrage (that isn't McDonald's or Fast Food). Why is it arbitrage? What is at least one factor that would eliminate the arbitrage and explain conceptually what that is. (10 pts)