1.You would like to evaluate the historical relationship between value-oriented and growth-oriented stocks that form the basis for the HML risk factor in the Fama-French multifactor models. The proxies you choose are the Russell 1000 Value Index and the Russell 1000 Growth Index, respectively.

a.The month price information for the 10-year period from 01/2009 to 12/2018 for each index could be downloaded from Yahoo! Finance or Bloomberg. For each index, calculate the monthly returns based on these monthly price series. First, on the downloaded spreadsheet, delete other prices while keeping only the "Adj Close" price, which is the closing price adjusted by dividends. Second, calculate return of monthtas, whereis the closing price of the last day of montht.

b.Calculate the average monthly return and the return standard deviation for each index series. Next, use regression analysis to estimate alphas of each of the two indexes based on the CAPM, Fama-French three-factor model and Fama-French-Carhart four-factor model. Which equity investment style (i.e., value versus growth) appears to have been more successful over this sample period?

c.Suppose that you are considering forming a hedge fund employing a strategy of always being long in growth stocks and short in value stocks. Evaluate the potential success of this strategy by regressing the difference in returns between the growth and value indexes on the CAPM, Fama-French three-factor model and Fama-French-Carhart four-factor model. What are the alphas and factor loadings of your strategies?