RSM330A2Q3_Student work - a Fund 1 Fund 2 t-stat...

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a) Fund 1 Fund 2 t-stat t stat Intercept (alpha) -0.0465 -1.2720 Intercept (alpha) 0.2044 3.2766 RMRF (beta) 1.0310 115.6418 RMRF (beta) 1.0221 67.1576 SMB 0.4000 32.9187 SMB 0.0150 0.7239 HML -0.3698 -26.8041 HML -0.0193 -0.8176 R square 0.9768 R square 0.9061 Fund 3 Fund 4 t stat t stat Intercept (alpha) 0.1082 2.5726 Intercept (alpha) -0.0333 -0.6779 RMRF (beta) 0.9802 95.4835 RMRF (beta) 1.0506 87.6949 SMB 1.0296 73.5918 SMB 0.3926 24.0446 HML 0.6538 41.1651 HML 0.7694 41.5100 R square 0.9701 R square 0.9434 b) Fund 1 - Fund C a growth fund : The book-to-market factor was low (negative) for fund 1, which implies it's a growth fund. Fund 2 - Fund M Large Cap following index : t-stats of size factor and book-to- market are low if not negative, meaning that coefficients of SMB and HML are around zero. So we can conclude that the performance of fund 2 is heavily rely on the market. Fund 3 - Fund B a small-cap value fund :The size factor (SMB) is one which is high, this factor is highly correlated with small-cap. The book-to-market value is relatively high, meaning we are looking at a value fund. Fund 4 - Fund O a value fund : The book-to-market factor which is highly correlated to value fund is high. Meaning the fund is dominated by value stocks.
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