the 30 of the highest book to market stocks minus the return on the 30 of the

The 30 of the highest book to market stocks minus the

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the 30% of the highest book-to-market stocks minus the return on the 30% of the lowest book-to-market stocks. UMD is the “momentum factor” premium. This is the return on the 30% of stocks that were furthest up over the prior year minus the return on the 30% of stocks that were furthest down over the prior year. 11. For each of the six actively managed funds, run a multiple regression using a multifactor benchmark. Specifically, use the 4-factor model comprised of the three Fama and French factors (RMRF, SMB, and HML) and the Carhart extension (UMD). TEPLX Coefficients t Stat Intercept -0.000504112 -0.31384 Mkt-Rf 0.900099071 25.2592 4 SMB 0.017670136 0.37796 8 HML 0.346665779 7.33943 3 UMD -0.044922878 -1.5877 PRWCX Coefficients t Stat Intercept 0.003032997 2.77005 2 Mkt-Rf 0.562103868 23.14115 SMB 0.019254104 0.60419 4 HML 0.375224955 11.65418 UMD -0.0370142 -1.91914 JANSX Coefficients t Stat Intercept -0.00026055 -0.20143
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Mkt-Rf 1.043212041 36.3544 4 SMB -0.052050415 -1.38259 HML -0.295166125 -7.7602 UMD -0.006820064 -0.29933 FMAGX Coefficients t Stat Intercept -0.001495256 -1.42358 Mkt-Rf 1.085240558 46.5741 9 SMB -0.126082727 -4.12439 HML -0.007102965 -0.22998 UMD 0.002291044 0.12382 9 TWCGX Coefficients t Stat Intercept 0.00006759 0.06633 5 Mkt-Rf 0.983124646 43.4909 5 SMB -0.091299961 -3.07855 HML -0.226268393 -7.55155 UMD 0.062058503 3.45749 9 OARDX Coefficients t Stat Intercept -0.000219782 -0.17763 Mkt-Rf 0.843202516 30.7192 9 SMB -0.24289492 -6.74501 HML 0.361299378 9.93043 2 UMD 0.00270233 0.12399 12. Comment on the resulting multifactor Jensen’s alphas for each fund under the 4-factor benchmark. Are any alphas significant after controlling for multiple “risk” factors? Also, comment on whether any of the size, value, or momentum betas is significant. What information do each of the betas convey about the investment style of the fund manager? We can found from question 11 that PRWCX has the significant positive alpha which is 0.003 and the t-State of alpha is 2.77. The alphas from other fund are all not significant because of the low t-
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State. For FMAGX, TWCGX and OARDX, the t-Stats of SMB are pretty high. Thus, the size betas are significant for these funds. For all funds except FMAGX, the t-Stats of HML are pretty high. Thus, the value betas are significant for these funds. For PRWCX and TWCGX, the t-Stats of UMD are pretty high. Thus, the momentum betas are significant for these funds. Thus, we have the following conclusion: TEPLX: This fund manager focus more on value factor premium of stocks than on other factors premium of stock. PRWCX: This fund manager focus more on value factor premium of stocks than on other factors premium of stocks. JANSX: This fund manager focus more on value factor premium of stocks than on other factors premium of stocks. FMAGX: This fund manager focus more on size factor premium of stocks than on other factors premium of stocks. TWCGX: This fund manager focus on all size, value and momentum factors premium of stocks. OARDX: This fund manager focus more on both the size and value factors premium of stock than on the momentum factor premium. Part IV The worksheet labeled “Apple and Dell” contains returns on two stocks, Apple and Dell, over the period January 2005 – December 2010. Create a series of excess returns for each stock and then run a CAPM regression of each series on market excess returns.
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