Question: In this problem, you are going to work with some real-world data. File contains historical returns of three mutual funds from Morningstar Direct. For your
In this problem, you are going to work with some real-world data. File contains historical returns of three mutual funds from Morningstar Direct. For your convenience, I included data on the Fama-French research factors in the same file.
DFUSX Large-Cap Investment style
LADYX Small-Cap Growth Investment style
VSGIX Small-Cap Growth Investment style
- Estimate the Fama-French 3-factor model for the funds. Note: dont forget to use excess returns (not returns) on the left-hand side of you regression.
The Fama-French 3 factor model can be written as:
ri rf = i,F F 3 + i,mkt(rmkt rf ) + i,smbrsmb + i,hmlrhml + i
-Report the Fama-French 3-factor alphas, their t-stats, and all the Fama-French 3 factor
betas (i,mkt, i,smb, i,hml).
-Are the estimated Fama-French 3 factor alphas statistically significantly different?
from zero?
- What do the estimated betas (i,mkt, i,smb, i,hml) tell you about funds loadings on the SMB and HML factors? Is this consistent with the funds styles as described in the investment menu?
| date | mkt -rf | smb | hml | mom | rf | DFUSX | LADYX | VSGIX | |
| 200101 | 3.13 | 6.57 | -4.9 | -25.06 | 0.54 | 3.485 | 4.72727 | 0.18232 | |
| 200102 | -10.05 | -0.74 | 12.9 | 12.51 | 0.38 | -9.0739 | -13.1944 | -8.46224 | |
| 200103 | -7.26 | 0.34 | 6.45 | 8.35 | 0.42 | -6.42395 | -9.06667 | -5.16899 | |
| 200104 | 7.94 | 0.52 | -4.69 | -7.97 | 0.39 | 7.81938 | 8.57771 | 9.85325 | |
| 200105 | 0.72 | 2.6 | 3.14 | 2.12 | 0.32 | 0.61287 | 3.91627 | 1.24046 | |
| 200106 | -1.94 | 6.05 | -1.06 | 0.35 | 0.28 | -2.46576 | 2.92398 | 3.39303 | |
| 200107 | -2.13 | -4.35 | 5.58 | 5.47 | 0.3 | -0.93946 | -5.68182 | -2.46126 | |
| 200108 | -6.46 | 2.49 | 2.5 | 5.54 | 0.31 | -6.32244 | -2.81124 | -2.99065 | |
| 200109 | -9.25 | -6.13 | 1.6 | 11.53 | 0.28 | -8.03446 | -15.5647 | -12.7168 | |
| 200110 | 2.46 | 7.63 | -8.1 | -8.41 | 0.22 | 1.84049 | 8.646 | 6.18102 | |
| 200111 | 7.54 | -0.41 | 2 | -8.58 | 0.17 | 7.71084 | 7.43243 | 6.54886 | |
| 200112 | 1.61 | 4.57 | 1.1 | -0.02 | 0.15 | 0.83246 | 7.75681 | 6.3388 | |
| 200201 | -1.44 | 1.19 | 3.33 | 3.69 | 0.14 | -1.44766 | -3.17769 | -0.092 | |
| 200202 | -2.29 | -1.1 | 2.5 | 6.76 | 0.13 | -1.9209 | -3.14802 | -3.13076 | |
| 200203 | 4.24 | 4.23 | 1.11 | -1.67 | 0.13 | 3.68335 | 6.77732 | 7.03422 | |
| 200204 | -5.2 | 5.94 | 3.93 | 7.96 | 0.15 | -6.12472 | -1.61917 | 1.50977 | |
| 200205 | -1.38 | -3.21 | 1.69 | 2.97 | 0.14 | -0.71174 | -4.2133 | -4.54943 | |
| 200206 | -7.21 | 4.26 | 0.13 | 6.15 | 0.13 | -7.10909 | -6.39175 | -5.95784 | |
| 200207 | -8.18 | -5.3 | -3.41 | 3.34 | 0.15 | -7.74194 | -17.0338 | -11.8908 | |
| 200208 | 0.5 | -2.44 | 2.49 | 1.77 | 0.14 | 0.55944 | -0.26549 | 1.99115 | |
| 200209 | -10.35 | 2.57 | 1.31 | 9.09 | 0.14 | -10.802 | -7.80834 | -4.98915 | |
| 200210 | 7.84 | -2.9 | -5.46 | -5.3 | 0.14 | 8.76369 | 2.98364 | 4.3379 | |
| 200211 | 5.96 | 2.84 | -1.15 | -16.17 | 0.12 | 5.89928 | 8.8785 | 5.03282 | |
| 200212 | -5.76 | 0 | 2.25 | 9.65 | 0.11 | -5.96955 | -6.35193 | -4.05208 | |
| 200301 | -2.57 | 1.39 | -0.93 | 1.62 | 0.1 | -2.61628 | -3.48304 | -2.72628 | |
| 200302 | -1.88 | -0.34 | -1.46 | 1.25 | 0.09 | -1.49254 | -2.5641 | -2.69058 | |
| 200303 | 1.09 | 0.89 | -2.09 | 1.61 | 0.1 | 0.92443 | 2.92398 | 1.84332 | |
| 200304 | 8.22 | 0.57 | 1.03 | -9.46 | 0.1 | 8.28313 | 8.14394 | 7.1267 | |
| 200305 | 6.05 | 4.7 | -0.3 | -10.77 | 0.09 | 5.28512 | 9.10683 | 8.55333 | |
| 200306 | 1.42 | 1.67 | 0.66 | -1.06 | 0.1 | 1.30432 | 2.9695 | 2.23735 | |
| 200307 | 2.35 | 5.25 | -1.15 | -0.31 | 0.07 | 1.70157 | 6.93687 | 6.27973 | |
| 200308 | 2.34 | 2.6 | 2.03 | -0.56 | 0.07 | 1.9305 | 5.46647 | 6.17726 | |
| 200309 | -1.24 | 0.79 | 0.02 | -0.19 | 0.08 | -1.134 | -2.62612 | -2.61383 |
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