I need help with number 2 on the attached file! Thank you!

PROF. DAVID SCHREINDORFER FIN 421 - SPRING 2016 Assignment 6 Due: Wednesday, 04.06.16 at 11:59 pm In this assignment you will perform a performance analysis for a large U.S. mutual fund and attempt to relate fund performance to characteristics of the fund. Mutual Fund Performance Evaluation On Blackboard, you will nd a spreadsheet containing historical returns (and other data) of the Fidelity Magellan Fund, as well as the three Fama-French factors and the momentum factor. Don't forget to deduct the risk free rate (RF) where needed. 1. Perform market, Fama-Frech, and 4-factor model regressions. What do the regressions suggest about the investment strategy of this fund? Is this a good fund to invest in? 2. Perform rolling window 4-factor model regressions: In each month t, estimate the regression using data for months t 59 to t.1 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. 3. 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. 4. In each month t, compute the average excess return on the market using data for months t59 to t. Denote this variable by rM,t . Similarly, denote the average excess return on the Magellan Fund in months t 59 to t (computed in part 2a) by rF,t . Regress the variable 'ow' (in column I) in month t on rM,t and rF,t using the available dates ,i.e. 1991-2010. What does the variable 'ow' measure? Hint: The spreadsheet contains a formula that computes ow. Interpret the two estimated slope coecients of your regression. Hint: Keep in mind that this is a multivariate regression. 1 The easiest way to do this in Excel is the '=linest()' function. You can use linest as an array function and have it return all slope coecients (betas) and the intercept (alpha) simultaneously. For estimating the 4-factor model, select a 51 block of cells, type =linest() with the appropriate inputs, then press SHIFT-CTRL-ENTER. Consulting the help page for LINEST may help. 1/1