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This exercise asks you to apply the Fama - French 3 factor model to evaluate how risk factor sensitivity is estimated at the portfolio level.

This exercise asks you to apply the Fama-French 3 factor model to evaluate how risk factor sensitivity is estimated at the portfolio level.
Ri,te=i+i,MRMKTe+i,SMBSMBt+i,HMLHMLt+ei,t
To simplify notation in the regression notice that:
Ri,te=Ri,t-RF,t= is stock or portfolio ith excess return and RMKTe=RMt-RF,t= is the excess return on a "stock market portfolio".
SMB = Small Minus Big, i.e., the return of a portfolio of small stocks in excess of the return on a portfolio of large stocks.
HML = High Minus Low, i.e., the return of a portfolio of stocks with a high book-to-market ratio in excess of the return on a portfolio of stocks with a low book-to-market ratio.
Consider the monthly returns from Nov-2008 to October 2017 produced by a popular mutual fund Fidelity Magellan (FMAGX). This fund seeks capital appreciation. The fund invests primarily in common stocks. It invests in either "growth" stocks or "value" stocks or both.
\table[[DATE,MKT,SMB,HML,RETX_FMAGX],[2008M11.,-7.86,-2.99,-5.94,-11.36],[2008M12,1.74,3.59,-0.24,4.63],[2009M01,-8.12,-0.01,-11.1,-7.31]]
Click to download full dataset Excel file.
In the estimation of the model, choose heteroscedasticity-robust standard errors.
Question 4: The estimated model is (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.):
Rie=
q,+,-Req,SMBt+q,HML
a.Rie=-2.23+0.01*RMKTe+0.50*SMBt-1.99*HMLt
b.Rie=-1.44+1.99*RMKTe+1.40*SMBt-1.12*HMLt
c.Rie=-2.01+3.15*RMKTe+2.90*SMBt-0.46*HMLt
d.Rie=-0.08+1.03*RMKTe+0.20*SMBt-0.08*HMLt
Rie=-2.17+1.03*RMKTe+3.20*St-1.43*HMLt
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