Question
Using Net Asset Value (NAV) and other relevant data, you investigate the performance of three fund managers: M, P, and S. You utilize the Fama-French
Using Net Asset Value (NAV) and other relevant data, you investigate the performance of three fund managers: M, P, and S.
You utilize the Fama-French 3 Factor model for all fund managers:
rpt-rft = p + 1pMRPt + 2pSMBt + 3pHMLt + pt
Where
rpt = portfolio return at month-t
MRP = rmt-rft
SMB = Small minus Big
HML = High minus Low
rft = riskless return at month-t
rmt = market return at month-t
pt = regression residuals which are expected to be white noise
The regression results are presented in Table 1.
Tabel 1. Regression results of M, P, and S Funds based on Fama-French Three Factor Model Funds (all necessary auto regressive terms are already applied but not reported). Note: MRP = rmt-rft; SMB=Small minus Big; HML=High minus Low
| M Coefficient (Standard Error) | P Coefficient (Standard Error) | S Coefficient (Standard Error) |
Intercept | -0.0005 (0.0011) | 0.0069 (0.0034) | 0.0016 (0.0013) |
MRP | 1.0286 (0.0198) | 0.8572 (0.0502) | 1.0104 (0.0234) |
SMB | 0.0888 (0.0382) | -0.2345 (0.1058) | 0.0725 (0.0449) |
HML | -0.0063 (0.0259) | 0.2195 (0.0658) | 0.0065 (0.0306) |
Standard Error of Regression | 0.0109 | 0.0254 | 0.0128 |
Adjusted-R2 | 0.9750 | 0.8783 | 0.9650 |
What is the information ratio of Fund S? | Answer 1Choose...0.5/0.25/0.125/P/S/M |
Which fund performs the worst? | Answer 2Choose...0.5/0.25/0.125/P/S/M |
Which fund(s) generate significant abnormal return (more than the expected return based on FF3F Model)? Hint: you must calculate the t-statistics. | Answer 3Choose...0.5/0.25/0.125/P/S/M |
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