We rely on CAPM to analyze the performance of the mutual fund Montserrat Capital, managed by Mr. Stevensona star in the mutual fund industry. We collect monthly data between 1981 and 2012 (384 observations) on returns, measured in percentage terms, and run the regression

Please analyze what explains the performance of Mr. Stevensons fund: whether the performance comes from his special skills to earn more than what CAPM predicts, from exposure to risk, or from both sources.

1. We rely on CAPM to analyze the performance of the mutual fund Montserrat Capital, managed by Mr. Stevensona star in the mutual fund industry. We collect monthly data between 1981 and 2012 (384 observations) on returns, measured in percentage terms, and run the regression R, - Rp = Bo + B. * (Rmt R 1) + &r where Rt is the fund's return in month t, Rmt is the market return in month t, and Rft is the risk free rate of return in month t. We estimate the following: Bo=0.82 (with a t- statistic=+1.54), 2 =1.06 (with a t-statistics=+8.72), and the adjusted-Rfor the model was 87.9%. Please analyze what explains the performance of Mr. Stevensons fund: whether the performance comes from his special skills to earn more than what CAPM predicts, from exposure to risk, or from both sources