Using the benchmark, Fund and risk free historical returns (in Tutorial9.xlsx) conduct a top down analysis of its returns.

a) First you will run a regression using the excess monthly returns of the fund against the excess returns of the benchmark (monthly excess returns for fund or benchmark = fund or benchmark returns risk-free return). Use the coefficients to obtain Jensens alpha and the tracking error. Further, analyse the significance of Alpha to explain Fund Managers skill.

b) Calculate the average return for both the fund and the benchmark and this provides you with the numerator value for Treynors and Sharpes ratios. The denominator for Treynor ratio is the coefficient of the independent variable. The denominator for the Sharpes ratio is the standard deviation of the excess returns.

c) What is the tracking error of the fund? Use the regression results (standard error) and convert it into an annualised figure. Calculate the Information ratio of the fund using Jensens Alpha/Tracking Error

d) Recalculate the tracking error of the fund by calculating the standard deviation of the difference in returns.

e) Using the results of the top down performance measures provide a description of the fund and its value in an investors portfolio.

Date Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 rf -1.29 -1.46 -0.20 0.61 0.16 0.43 0.71 1.17 -0.92 0.23 -0.02 -0.34 1.09 0.86 -0.56 -0.26 0.29 0.80 -0.34 0.67 0.45 0.15 0.80 -0.46 0.49 0.23 1.48 0.63 0.93 1.79 0.29 Fund 1.18 -0.53 3.82 3.11 2.28 -0.19 -2.93 2.52 -2.03 1.39 0.49 4.02 1.60 1.71 -2.20 1.51 -3.26 2.52 1.12 3.25 -5.35 1.20 0.31 -7.54 -1.94 -1.08 2.83 6.71 -0.25 3.20 -0.17 BM 2.74 4.14 -1.99 2.21 3.12 0.24 -2.89 0.30 -0.51 0.63 0.03 2.62 1.62 1.77 -1.25 0.36 -3.84 2.89 1.16 3.07 0.01 1.43 -1.13 -7.86 -2.33 -0.18 2.95 5.54 0.86 1.24 1.52 Date Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 rf -1.29 -1.46 -0.20 0.61 0.16 0.43 0.71 1.17 -0.92 0.23 -0.02 -0.34 1.09 0.86 -0.56 -0.26 0.29 0.80 -0.34 0.67 0.45 0.15 0.80 -0.46 0.49 0.23 1.48 0.63 0.93 1.79 0.29 Fund 1.18 -0.53 3.82 3.11 2.28 -0.19 -2.93 2.52 -2.03 1.39 0.49 4.02 1.60 1.71 -2.20 1.51 -3.26 2.52 1.12 3.25 -5.35 1.20 0.31 -7.54 -1.94 -1.08 2.83 6.71 -0.25 3.20 -0.17 BM 2.74 4.14 -1.99 2.21 3.12 0.24 -2.89 0.30 -0.51 0.63 0.03 2.62 1.62 1.77 -1.25 0.36 -3.84 2.89 1.16 3.07 0.01 1.43 -1.13 -7.86 -2.33 -0.18 2.95 5.54 0.86 1.24 1.52