Replicate the China's hedge fund index using the ETFs provided in the "homework2data.xlsx".

Please:

1. write down your assumptions and replication steps;

2. calculate the expected return, risk, and Sharpe ratio;

3. plot the cumulative investment returns;

4. find the correlation between your replicated portfolio and hedge fund index;

5. Evaluate the fitness of your replication product.

(This is an open question. There is no unique answer. Please find the data in the homework 2

folder. Submit your analysis in word format. Do not submit your working steps or programming

codes.)

 

yyyymm	date	hedge_fund_index1_by_CHFRC(CHFRC001)	hedge_fund_index2_by_wind(885303.WI)	ret_511010	ret_510300	ret_518880	ret_513500	ret_159920	rf_mon	mktrf	SMB	VMG	GOVBOND_China	DEFAULTSPREAD_China	COMMODITY_China
201304	2013/4/30	-0.0082		0.005241388	-0.016818182			0.009463722	0.0024	-0.025	-0.0061	0.0133	0.003139603	0.004224167	-0.051926065
201305	2013/5/31	0.0735		0.001452272	0.06518724			-0.007291667	0.0025	0.0779	0.0553	-0.0383	0.001674067	0.007707025	8.15395E-05
201306	2013/6/30	-0.0717		-0.000543812	-0.14453125			-0.061909759	0.0024	-0.1346	-0.0168	0.0355	0.003487865	-0.002341215	-0.03580106
201307	2013/7/31	0.0279		-0.007849262	0.00456621			0.053691275	0.0025	0.0265	0.0275	-0.0296	0.001593049	0.000396221	0.009132497
201308	2013/8/31	0.0198		-0.012532245	0.057575758	0.048927362		-0.013800425	0.0025	0.0499	0.0427	0.0097	0.002385772	-0.001122386	0.048860808
201309	2013/9/30	0.0331		1.02847E-05	0.042024833	-0.049515608		0.059203445	0.0024	0.0425	-0.0071	-0.0289	0	0.003785375	-0.004641687
201310	2013/10/31	-0.0136		-0.004082976	-0.014665445	-0.013590034		0.009146341	0.0025	-0.0265	0.0126	0.0547	0.001586729	-0.000449413	-0.006669931
201311	2013/11/30	0.0216		-0.011462679	0.025581395	-0.065059319		0.025176234	0.0024	0.0418	0.0374	-0.0279	0.001368186	-0.004596886	-0.002222079
201312	2013/12/31	-0.0179		-0.003510018	-0.046712018	-0.027425297		-0.032416503	0.0025	-0.0458	0.018	0.034	0.003307925	-0.004207691	-0.021403756
201401	2014/1/31	0.0178		0.007506028	-0.057564225	0.035774411		-0.053807107	0.0025	-0.023	0.0322	-0.0483	0.000430046	0.001311068	-0.042916253
201402	2014/2/28	0.0074		0.009614384	-0.00908632	0.065014222	0.058945191	0.051502146	0.0023	0.0053	0.0433	-0.0115	0.002292592	0.006337914	-0.015797119
201403	2014/3/31	-0.0230		-0.003813254	-0.013754457	-0.018313621	0.008789063	-0.021428571	0.0025	-0.0269	0.0175	0.0492	0.004574696	-0.001663056	-0.009409015
201404	2014/4/30	-0.0040		0.010893855	0.003615702	0.015157404	0.006776379	0.008342023	0.0024	-0.0109	-0.0139	0.0191	0.001850007	0.004904348	-0.007157047
201405	2014/5/31	0.0074		0.012219459	0.002058672	-0.029479326	0.025961538	0.04033092	0.0025	0.0106	0.0126	-0.0327	0.005255682	0.003689704	-0.002447543
201406	2014/6/30	0.0171		0.000586409	0.011813046	0.037080868	0.024367385	0.003976143	0.0024	0.0216	0.0238	-0.0219	0.003391267	0.004658196	0.008614283
201407	2014/7/31	0.0272		-0.00580003	0.100507614	-0.019779384	0.000914913	0.077227723	0.0025	0.0771	0.0088	0.0188	0.001971553	0.003699087	-0.028250042
201408	2014/8/31	0.0352		0.006911201	-0.006457565	-0.008925107	0.011882998	-0.007352941	0.0025	0.0119	0.0261	-0.0298	0.003092059	0.004905639	-0.027170984
201409	2014/9/30	0.0507		0.01145643	0.04549675	-0.048942835	-0.008130081	-0.036111111	0.0024	0.0696	0.0538	-0.0332	0.00602494	0.002936758	-0.052403715
201410	2014/10/31	0.0085		0.016476059	0.025310835	-0.032935364	0.008196721	0.015369837	0.0025	0.0154	0.0069	0.0264	0.006197772	0.007889126	0.016025609
201411	2014/11/30	0.0399		0.012547002	0.116067562	0.001702852	0.028906956	-0.005676443	0.0024	0.0883	-0.0176	0.0476	0.006090387	0.005680882	-0.025683295
201412	2014/12/31	0.0421		-0.00669026	0.253783469	0.025074373	0.007901668	-0.005708849	0.0023	0.1525	-0.1735	0.1517	0.00213249	-0.003566102	0.00966111
201501	2015/1/31	0.0226	0.0305	0.018517253	-0.032497679	0.053897181	-0.021777003	0.046889952	0.0023	0.0045	0.0752	-0.0247	0.006795717	0.000548292	-0.039910759
201502	2015/2/28	0.0392	0.0347	0.013446167	0.040307102	-0.030291109	0.041852182	0.010968921	0.0021	0.0431	0.0161	-0.0306	0.006340765	0.000182285	0.03856442
201503	2015/3/31	0.0909	0.0787	-0.015764339	0.132841328	-0.040162272	-0.015384615	0.025316456	0.0021	0.1492	0.0801	-0.0446	0.002506775	0.00201343	-0.032001114
201504	2015/4/30	0.0814	0.1042	0.020792098	0.175624321	0.018174134	0.006944444	0.104056437	0.002	0.1601	-0.0065	-0.0091	0.00371697	0.002463567	0.036243721
201505	2015/5/31	0.0922	0.0752	-0.008574763	0.016624336	-0.01162308	0.00862069	-0.030351438	0.002	0.0699	0.1773	-0.1028	0.002625909	0.006426303	-0.006781072
201506	2015/6/30	-0.0443	-0.0137	-0.003977936	-0.069270952	-0.014699706	-0.024786325	-0.017298188	0.0018	-0.0812	-0.0221	0.0876	0.00490229	0.001131778	-0.051684384
201507	2015/7/31	-0.0834	-0.0212	0.021646713	-0.141288433	-0.076300085	0.031551271	-0.071248952	0.0017	-0.1461	-0.0417	0.0671	0.004410585	0.005090476	-0.051101498
201508	2015/8/31	-0.0416	-0.0122	0.005411306	-0.118499574	0.079372404	-0.016992353	-0.086642599	0.0016	-0.1381	0.0058	0.0198	0.00405855	0.00435409	-0.016205963
201509	2015/9/30	-0.0239	-0.0186	-0.000686692	-0.051257253	-0.010688328	-0.04494382	-0.027667984	0.0014	-0.0431	0.0368	0.0225	0.004704791	0.003324825	-0.01834459
201510	2015/10/31	0.0475	0.0470	0.010363175	0.113149847	0.015989628	0.096832579	0.081300813	0.0014	0.1439	0.0765	-0.0595	0.00771666	-0.001613107	-0.010498024
201511	2015/11/30	0.0259	0.0234	-0.002086301	0.006715507	-0.071458954	0.014851485	-0.012218045	0.0012	0.0324	0.0852	-0.0004	0.001963479	0.002098009	-0.046465467
201512	2015/12/31	0.0252	0.0336	0.011669031	0.046694967	0.022446175	0.003252033	0.006660324	0.0013	0.0317	0.038	0.0421	0.009471553	-0.000152556	0.049374901
201601	2016/1/31	-0.1109	-0.0978	-0.000355046	-0.212050985	0.058691756	-0.065640194	-0.110586011	0.0013	-0.2509	-0.0523	0.0599	0.004270739	0.0034403	-0.005185434
201602	2016/2/29	-0.0031	0.0073	0.005163652	-0.022426471	0.094794752	0.029488291	-0.021253985	0.0012	-0.022	-0.002	0.0083	0.003350515	0.002338168	0.038003172
201603	2016/3/31	0.0352	0.0251	0.009576617	0.120345995	-0.015075377	0.025273799	0.076004343	0.0013	0.1452	0.0677	-0.0003	0.005843822	0.002365619	0.054912093
201604	2016/4/30	-0.0029	0.0087	-0.006649915	-0.017791205	0.043956044	0.018077239	0.016145308	0.0012	-0.0271	0.0168	0.0102	0.000319224	0.001865375	0.122679787
201605	2016/5/31	-0.0076	-0.0085	0.001824933	0.005468216	-0.031578947	0.034705408	0.021847071	0.0013	-0.0011	-0.0071	0.0158	0.003191218	0.000573954	-0.094410138
201606	2016/6/30	0.0163	0.0113	0.006023933	-0.002719239	0.093944099	0.002340094	0.006802721	0.0012	0.0221	0.0452	-0.0083	0.003117445	0.002212993	0.125347544
201607	2016/7/31	0.0139	0.0284	0.007717889	0.029652352	0.014549326	0.104280156	0.057915058	0.0013	0.0115	-0.0143	0.0596	0.004883618	0.002284137	0.004626621
201608	2016/8/31	0.0138	0.0160	0.003353496	0.041377027	-0.012591815	-0.009866103	0.056569343	0.0013	0.0371	0.0056	-0.0087	0.004922999	0.002193745	-0.004715845
201609	2016/9/30	-0.0027	0.0009	0.003191574	-0.019707565	0.007084662	0.031316726	0.020725389	0.0012	-0.0254	0.0139	0.0208	0.003203115	0.00149172	0.026883872
201610	2016/10/31	0.0102	0.0125	0.002704207	0.022373541	-0.019345762	0.042097999	0.000846024	0.0013	0.0248	0.0139	-0.0076	0.006197959	-0.001091494	0.100586513
201611	2016/11/30	0.0118	0.0169	-0.015590986	0.058991437	-0.048780488	0.103311258	0.003381234	0.0012	0.0364	-0.0136	0.0128	-0.00223992	0.005307405	0.089449711
201612	2016/12/31	-0.0240	-0.0209	-0.008729207	-0.066486972	-0.006033183	-0.053421369	-0.026116259	0.0013	-0.0565	0	0.0033	-0.003554502	0.002359931	-0.013691795
201701	2017/1/31	-0.0020	0.0035	0.001418004	0.025344883	0.001896813	-0.075459734	0.046712803	0.0013	0.007	-0.0315	0.0285	-0.000500657	0.002462098	0.078316393
201702	2017/2/28	0.0178	0.0168	0.002299867	0.01689612	0.050359712	0.041838134	0.021487603	0.0011	0.0282	0.0127	0.0034	0.001941018	-0.000938344	-0.011615426
201703	2017/3/31	0.0045	0.0100	-0.002771504	0.002769231	-0.004686373	0.036208032	0.022653722	0.0013	-0.0084	-0.0055	0.0336	0.000999875	-0.000379794	-0.041656777
201704	2017/4/30	-0.0039	0.0024	-0.007525514	-0.006750537	0.018471568	-0.013341804	0.012658228	0.0012	-0.0227	-0.0381	0.0469	0.00268448	-0.001969445	-0.028780704
201705	2017/5/31	-0.0123	0.0006	-0.006864323	0.016991041	-0.013157895	-0.014810045	0.0421875	0.0013	-0.0191	-0.0516	0.0568	-0.002864081	0.000672874	-0.05466951
201706	2017/6/30	0.0332	0.0341	0.004522401	0.055893074	-0.021981982	-0.005882353	-0.002998501	0.0012	0.0414	-0.0002	0.0266	0.001623478	0.00162281	0.057749369
201707	2017/7/31	0.0060	0.0105	-0.000437445	0.0287687	0.010316875	0.009861933	0.055639098	0.0013	0.0245	-0.0125	0.0448	-0.000311701	0.003452315	0.070546506
201708	2017/8/31	0.0134	0.0165	0.001923778	0.024888143	0.005105762	-0.025390625	0.007834758	0.0013	0.0248	-0.0037	-0.0228	0.002182589	0.000711012	0.052492908
201709	2017/9/30	0.0193	0.0269	-0.000191098	0.004638472	-0.005079826	0.028056112	-0.003533569	0.0012	0.0062	0.0093	-0.0078	-0.000124448	0.002962401	-0.075648983
201710	2017/10/31	0.0214	0.0274	-0.005424593	0.04101032	-0.008752735	0.029889539	0.026950355	0.0013	0.0135	-0.039	0.0382	0.00074678	0.002130308	-0.010127991
201711	2017/11/30	-0.0113	0.0009	-0.000722953	-0.002087138	0.000735835	0.010725552	0.031767956	0.0012	-0.0293	-0.0313	0.0378	0	0.002069322	0.057619369
201712	2017/12/31	0.0042	0.0005	0.001749164	0.005490196	-0.004411765	0.019975031	0.00334672	0.0013	-0.0012	-0.0179	0.0229	0.000248741	0.001722442	-0.002778231
201801	2018/1/31	0.0186	0.0265	0.004196149	0.05876235	0.009970458	0.019583843	0.060707138	0.0013	0.0366	-0.0584	0.0667	0.002611128	0.000105627	-0.003063146
201802	2018/2/28	-0.0365	-0.0325	0.007292093	-0.058693517	-0.015722121	-0.025810324	-0.057232704	0.0011	-0.0519	0.0037	0.0019	0.004836609	-0.001099514	0.021137203
201803	2018/3/31	0.0019	0.0046	0.005124451	-0.030785286	0	-0.05237215	-0.03335557	0.0013	-0.0141	0.0426	-0.0666	0.005615551	-0.002311227	-0.072871215
201804	2018/4/30	-0.0190	-0.0128	0.010304551	-0.036339166	0	0.021456437	0.014492754	0.0012	-0.0328	-0.0125	-0.0004	0.005891016	0.000649479	0.020549544
201805	2018/5/31	0.0122	0.0150	-0.001869009	0.012849162	-0.002228826	0.027371101	0.017687075	0.0013	0.0027	-0.0153	0.0449	0.004758419	-0.001670719	0.022297646
201806	2018/6/30	-0.0397	-0.0289	0.006304113	-0.069773855	-0.00930752	0.034696406	-0.018716578	0.0012	-0.0789	-0.0286	0.0371	0.004493018	-0.001276993	0.000252613
201807	2018/7/31	-0.0026	0.0100	0.004979797	0.010672991	0.004509583	0.054491018	0.027929155	0.0013	0.009	-0.0029	0.0366	0.005923598	-6.17182E-05	0.016213642
201808	2018/8/31	-0.0313	-0.0299	0.000361495	-0.051921385	-0.01010101	0.047132311	-0.021868787	0.0013	-0.0586	-0.026	0.0071	0.001081601	0.005702227	0.012553787
201809	2018/9/30	0.0025	-0.0023	0.002370901	0.034962871	-0.008692366	0.007592191	0.002710027	0.0012	0.0229	-0.0301	0.0309	0.001920768	0.002601458	0.005006942
201810	2018/10/31	-0.0437	-0.0373	0.005073509	-0.086397608	0.038505528	-0.066200215	-0.092567568	0.0013	-0.0894	-0.0126	0.0255	0.004313444	0.000278462	-9.76862E-05
201811	2018/11/30	0.0133	0.0173	0.003936836	0.009489529	0.002936858	0.01556196	0.067758749	0.0012	0.0086	0.0464	-0.0316	0.006263422	0.000503327	-0.080801384
201812	2018/12/31	-0.0234	-0.0221	0.016016731	-0.05445705	0.034407028	-0.105561862	-0.055788006	0.0013	-0.0416	-0.0032	0.0194	0.00705436	-0.002158072	0.005906334
201901	2019/1/31	0.0197	0.0254	0.001123567	0.066506685	0.003892427	0.059010152	0.071639586	0.0013	0.0288	-0.046	0.0635
201902	2019/2/28	0.0654	0.0482	-0.002398821	0.144005143	-0.00140994	0.035350509	0.025499655	0.0011	0.1574	0.0504	-0.0955
201903	2019/3/31	0.0617	0.0660	0.003589708	0.056195561	-0.015884222	0.019675926	0.017473118	0.0013	0.0644	0.0423	-0.0281
201904	2019/4/30	0.0021	0.0072	-0.006657425	0.006916733	-0.003945481	0.054483541	0.023117569	0.0012	-0.0133	-0.0229	0.0306
201905	2019/5/31	-0.0370	-0.0308	0.007511802	-0.067899604	0.036370184	-0.045209903	-0.065848935	0.0013	-0.0636	0.014	0.0035
201906	2019/6/30	0.0224	0.0232	0.001769896	0.062641723	0.080264072	0.051860203	0.05943331	0.0012	0.0315	-0.0322	0.0398
201907	2019/7/31	0.0046	0.0094	0.004498007	0.009602561	0.017690576	0.04340836	-0.016960209	0.0013	-0.0017	-0.0311	0.0071
201908	2019/8/31	0.0042	0.0060	0.004256946	-0.008982827	0.108723135	-0.001027221	-0.051758461	0.0013	-0.0077	-0.0155	-0.0363
201909	2019/9/30	0.0086	0.0039	0.001759863	0.002132765	-0.031927024	0.01285347	0.016794962	0.0012	0.0061	0.0069	0.0113
201910	2019/10/31	0.0107	0.0072	-0.003707802	0.019686087	-0.009717314	0.014720812	0.020646937	0.0013	0.0111	-0.0218	0.0135
201911	2019/11/30	-0.0065	-0.0045	0.006909122	-0.014870858	-0.029140648	0.042521261	-0.01753203	0.0012	-0.018	-0.0081	0.0183
201912	2019/12/31	0.0441	0.0309	0.009059145	0.070709746	0.036447167	0.012955854	0.065202471	0.0013	0.0686	0.0111	0.0021
202001	2020/1/31	0.0164	0.0168	0.007909821	-0.024486767	0.013593381	0.017527238	-0.019329897	0.0013	-0.007	0.0038	-0.0306
202002	2020/2/29	0.0141	0.0082	0.00964412	-0.015720081	0.056268222	-0.054934823	-0.050591327	0.0012	-0.0089	0.007	-0.0372
202003	2020/3/31	-0.0368	-0.0105	0.010076744	-0.067233385	-0.010212531	-0.131034483	-0.092733564	0.0013	-0.0627	0.0299	0.0508
202004	2020/4/30	0.0320	0.0188	0.02631643	0.065175366	0.044617959	0.117346939	0.066361556	0.0012	0.0507	-0.0406	0.0038
202005	2020/5/31	0.0146	0.0091	-0.020113102	-0.010630023	0.031500267	0.029426687	-0.070815451	0.0013	0.003	0.0164	0.0012
202006	2020/6/30	0.0607	0.0260	-0.015303652	0.080712788	0.012939959	-0.007885658	0.050038491	0.0012	0.0801	-0.0183	0.0103
202007	2020/7/31	0.1559	0.0575	-0.001967278	0.136907611	0.077158917	0.06010929	0.014662757	0.0013	0.126	0.0042	0.0076
202008	2020/8/31	-0.0393	0.0100	-0.010414271	0.026105263	-0.022058824	0.089971884	0.014450867	0.0013	0.0199	0.022	0.017
202009	2020/9/30	-0.0382	-0.0128	0.001759511	-0.046778826	-0.036138734	-0.086844368	-0.082621083	0.0012	-0.0579	-0.0219	0.011
202010	2020/10/31	0.0110	0.0060	0.002162386	0.02389152	-0.019375944	-0.035781544	0.00931677	0.0013	0.0086	-0.0184	0.0124
202011	2020/11/30	0.0278	0.0162	-0.001446747	0.057599327	-0.069027457	0.08984375	0.079230769	0.0012	0.0365	-0.013	0.0463
202012	2020/12/31	0.0370	0.0209	0.004354809	0.050884516	0.061190739	0.02688172	0.019957234	0.0013	0.0299	-0.0923	-0.0472
202101	2021/1/31	0.0168	0.0123	0.000807834	0.011537734	-0.018701299	-0.004799302	0.032145353
202102	2021/2/28	0.0070	-0.0005	0.000807182	-0.00355273	-0.043673902	0.019728189	0.025727827
202103	2021/3/31	-0.0190	-0.0113	0.003505942	-0.052355038	-0.032659839	0.052450559	-0.011881188
202104	2021/4/30	0.0229	0.0069	0.005461971	0.015445545	0.037195994	0.053921569	0.002004008
202105	2021/5/31	0.0275	0.0053	0.002463295	0.040951638	0.056	-0.018604651	-0.005333333
202106	2021/6/30	0.0147	0.0041	0.005052806	-0.015361559	-0.063740857	0.033175355	0.008713137
202107	2021/7/31	-0.0116	-0.0043	0.010548643	-0.073059361	0.037946429	0.024464832	-0.102990033
202108	2021/8/31	0.0185	0.0063	0.001658308	0.001436782	-0.008064516	0.037313433	-0.002222222
202109	2021/9/30	-0.0075	0.0152	0.002527333	0.011477762	-0.039837398	-0.034892086	-0.042316258
202110	2021/10/31	0.0010	0.0199	-0.005289232	0.009321175	0.018628281	0.027953783	0.020930233
202111	2021/11/30	0.0185	0.0172	0.006760984	-0.014053403	-0.00110834	0.011240029	-0.083523159
202112	2021/12/31	0.0008	0.0014	0.007567972	0.019751578	0.010540915	0.032269631	0.004142502
202201	2022/1/31	-0.0567	-0.0234	0.007787854	-0.090654952	-0.013450453	-0.097950677	0.004125413
202202	2022/2/28	0.0103	0.0015	-0.003538254	0.003732982	0.053700612	-0.016942626	-0.050123254