You will find a spreadsheet on the bottom containing historical returns as well as other in- formation on the Fidelity Magellan Fund for the period 1968-2016. To conduct a performance analysis on this fund, you will also need data on di↵erent systematic risk factors. Go to Ken French's website and download monthly returns for the three Fama-French factors, the risk-free rate, and the momentum factor over the same sample period and add them to your spreadsheet. Note that the risk-free rate is included in the same file as the three Fama-French factors.
1. Perform rolling window 4-factor model regressions: In each month t (starting with the 60est month of the sample), estimate the regression using data for months t 59 to t.1
(1The easiest way to solve this in Excel is the '=linest()' function. You can use linest as an array function and have it return all slope coefficients (betas) and the intercept (alpha) simultaneously. For estimating the 4-factor model, select a 5*1 block of cells, type =linest() with the appropriate inputs, then press SHIFT-CTRL-ENTER. Consulting the help page for LINEST may help. )
Produce two plots:
. (a) Plot the time series of rolling-window alpha estimates, along with a rolling window average of the excess return (not adjusted for risk; also using data for months t 59 to t)
. (b) Plot the rolling-window beta estimates for the four factors. Put all four series in one plot.
2. Interpret the development of the coecients with respect to the data provided about the fund (changes of the manager, expenses,...). Do you see any connection to the facts about the fund? Comment on the alphas. Hint: This is an open-ended question, i.e. there isn't one correct answer. It is sucient to discuss a few things you notice about the relationship between the fund's betas and the other information you know about the fund.