Finance Paper Help-FIN 3083 Investments MUTUAL FUND PROJECT PART 2 Essay Help
FIN 3083 – Investments 1
Due: Thursday 4/19/2018 In Class 30 Points
MUTUAL FUND PROJECT – PART 2
The following questions can be answered using the “FF Factors.xlsx” spreadsheet on Harvey, in addition
to monthly return data for the mutual fund you chose to use in Part 1. Included in the FF
Factors spreadsheet are the monthly returns over the five year period beginning in 1/1/2013 and ending
12/31/2017 for various risk factors we have discussed in class. For this same time period, you will need
to compute the monthly returns for your fund using data that is downloaded from Yahoo finance. The
data that you download will be at the monthly frequency and you will need to use the adjusted closing
price data for your fund. Once you have completed the data setup, please answer the following.
1. Clearly describe, in detail, the strategy that your fund follows.(5 points)
2. Using a market model with the Vanguard Total Market Index (VTI) as the market factor, please
compute the following for your fund and PBRLX. (Make sure you are using excess returns!) (5 points)
Fund Ticker PBRLX
Fund Alpha (ˆ↵)
↵ˆ t-statistic
Mutual Fund Market Beta (ˆ
VTI )
ˆ
VTI t-statistic
R2
Average Monthly Excess Return
Average Monthly Standard Deviation
Annualized Sharpe Ratio
M2
Annualized Treynor Measure
Annualized Information Rat
FIN 3083 – Investments 2
3. Interpret the output from the market model for each of the mutual funds. Based on the output
statistics, is the market model a good fit? What does your output tell you about each of the funds and
how do they compare? Further, how would you compare each of the funds to a strategy that invested
solely in VTI? Support your discussion. (5 points)
FIN 3083 – Investments 3
4. Regress the excess return of each mutual fund onto the four factors (VTI, SMB, HML, UMD). You
are estimating the following model:
ri
rf = ↵i + i,V
T I (VTI
RF) + i,SMBSMB
+ i,HMLHML
+ i,UMDUMD
+ ei
Fill in the table with the regression output. (5 points)
Fund Ticker PBRLX
Fund Alpha (ˆ↵)
↵ˆ t-statistic
Mutual Fund Market Beta (ˆ
VTI )
ˆ
VTI t-statistic
Mutual Fund SMB Beta (ˆ
SMB)
ˆ
SMB t-statistic
Mutual Fund HML Beta (ˆ
HML)
ˆ
HML t-statistic
Mutual Fund UMD Beta (ˆ
UMD)
ˆ
UMD t
FIN 3083 – Investments 4
5. Interpret the beta coecients
for each fund in regards to mutual fund strategy. Are the sign and
significance of these betas as you would expect? How does the output of the four factor model compare
with that of the market model? (5 points
FIN 3083 – Investments 5
6. With the information you have gathered, do you think the portfolio manager of your fund has skill?
Why or why not? (5 points)
