You are an associate working for an important wealth fund. You are the given some international portfolio data in an excel file by one of your senior team members, Taylor Mason. You need to create a presentation for your Fund Manager, Bobby Axelrod. In the presentation, you need to convince Axelrod to create a new investment fund based on one of the ten portfolios.

Here is an issue: Axelrod doesnt have time to waste, especially on a young associate like yourself. So, you get a maximum of 10 power point slides to convince him that there is something interesting in the data and it is best to create an investment fund based on the portfolio you recommend.

Note: You are not expected to have any prior knowledge about these 10 portfolios. You will simply use the finance knowledge gained in this unit to examine these 10 unknown portfolios. You do not have to compute the betas or the factor premiums using regressions. They are already computed for you.

Here are some things that you should convey in your presentation:

Do you see any pattern with the average excess returns and the Sharpe ratio for the 10 portfolios?

Given Axelrod a rational explanation as to why you think that such a pattern exists.

Briefly explain to Axelrod the Fama and French 3-factor model.

You are given the unconditional betas for the 10 portfolios. What do these betas tell us in terms of risk?

You are given the price of risk (factor prices). What are factor prices? Did you find anything interesting with the factor price results?

Axelrod, just like any other fund manager, prefers high expected returns. Recommend a portfolio (out of the 10 portfolios) for Axelrod to buy and hold long-term. Why did you recommend this portfolio?

Portfolio	Beta_Mktrf	Beta_SMB	Beta_HML
P1	1.03862	-0.10483	-0.53227
P2	1.01401	-0.00177	-0.2185
P3	0.97984	0.05877	0.01231
P4	0.98232	0.04992	0.20039
P5	0.92738	-0.04888	0.2389
P6	0.96886	-0.01966	0.49133
P7	0.97312	0.05273	0.54428
P8	1.02128	0.1412	0.67674
P9	1.03174	0.32483	0.74278
P10	1.12207	0.4777	0.94253

Factor	lambda	(t-stat)
mktrf	1.6279	(1.41)
smb	-0.4259	(-0.83)
hml	0.5604	(3.93)