Description of Project
Choose an open-end fund.
Collect past 5 years of monthly returns into Excel. (January 2015 to January 2020). You will need to collect adjusted closing price from YahooFinance. (To get a return for January 2015 you will need price for December 2014).
Do a regression analysis in 2 different ways: CAPM, and Fama French 3 factor. For each of these two regressions the dependent variable will be the excess return of the fund. Discuss alpha, and market beta for the 2 models. In addition, discuss coefficients on HML and SMB for 3-factor modeling.
For each modeling, discuss the F statistic; discuss the signs and significances of the alpha and coefficients. Based on the Jensen’s Alpha, offer an opinion as to whether the management of the fund is adding value (superior risk-adjusted returns). According to your analysis, is there evidence that the fund is a value fund or growth fund? Or a small-cap fund or a large-cap fund?
Compare your calculated CAPM beta with the beta reported on Yahoo Finance. Discuss differences you find between CAPM and FF regressions. Discuss your results with regard to the fund’s name or marketing. Discuss in a 2-3-page write-up. SMB, HML and MRP can be found at the Ken French data site but I will post on Brightspace.
Data on MRP, HML, SMB and RF will be in the data file on Brightspace. Use this data from Brightspace so I can more efficiently assess your work. (Ken French data will occasionally retroactively change.)
Investorguide.com has a list of mutual funds.
Acceptable to work in teams of 1–3 (need to have 4?? Ok for 10% penalty).
Submission: You (your group) will submit 2 files through the Brightspacedropbox: 1) an Excel file and 2) a Word file. The Excel file should show the data and calculations required. The Word file will discuss the results and complete written portion of assignment.
Writing the minimum number of pages in itself does not fulfill assignment if important analysis is left out.
Submit by 11:59pm May 1, 2020.
Do not submit more than 2 files. Embed all last names of your group members into file names. Example: JonesSmithWilsonInvestProject.docx. Instructor reserves right to assign penalty for lateness or improper submission.
Write paper as though communicating an analysis to an audience that is well informed and understands our textbook.
Do not use percent-formatted cells in Excel. Do not mix percent values and decimal values in your regressions. Suggestion: make all values in percent by multiplying some values by 100 when necessary (data is already in percent). DO NOT FORMAT CELLS IN EXCEL AS PERCENT. This often causes errors that are hard to correct and hard for me to grade. DO NOT TYPE ANY PERCENT SIGNS INTO EXCEL. (Instructor reserves right to assign penalty for this.)
To facilitate my comparative grading, arrange your data so that earliest date is on top of worksheet. (Instructor reserves right to assign penalty for not doing this.)
IMPORTANT NOTE: Although rare, it’s possible to inadvertently select a fund which is difficult to calculate a beta. Please submit analysis of a fund where you get a significant F-stat.