Now suppose that instead of investing $50 in MKT and Rf, you short $100 of Rf (i.e.,
Question:
Now suppose that instead of investing $50 in MKT and Rf, you short $100 of Rf (i.e., you borrow $100 of Rf, agreeing to return the $100 plus its return at the end of the month. Note that this is, moneywise, the same as borrowing some unit, say a share, of Rf, and agree to return that same unit a month later.) and use those $100 plus $100 of your own money to invest in MKT. Thereafter, every month you sell whatever you have in MKT, pay for your short position in Rf, and proceed to short Rf again, and invest in MKT again, in a 2-to-1 ratio (for every dollar you short Rf, you invest two dollars in MKT). What is the average annual return and annual standard deviation of your net investment (i.e., after you’ve paid for your short position)? How much will your investment be worth at the end of the sample period?
Date | Mkt | SMB | HML | RF |
192607 | 3.18 | -2.56 | -2.43 | 0.22 |
192608 | 2.89 | -1.17 | 3.82 | 0.25 |
192609 | 0.59 | -1.4 | 0.13 | 0.23 |
192610 | -2.92 | -0.09 | 0.7 | 0.32 |
192611 | 2.84 | -0.1 | -0.51 | 0.31 |
192612 | 2.9 | -0.03 | -0.05 | 0.28 |
192701 | 0.19 | -0.37 | 4.54 | 0.25 |
192702 | 4.44 | 0.04 | 2.94 | 0.26 |
192703 | 0.43 | -1.65 | -2.61 | 0.3 |
192704 | 0.71 | 0.3 | 0.81 | 0.25 |
192705 | 5.74 | 1.53 | 4.73 | 0.3 |
192706 | -2.08 | 0.59 | -1.73 | 0.26 |
192707 | 7.56 | -3.25 | -1.14 | 0.3 |
192708 | 2.25 | -0.69 | -3.74 | 0.28 |
192709 | 4.97 | -3.63 | -0.63 | 0.21 |
192710 | -4.06 | 2.12 | -4.33 | 0.25 |
192711 | 6.79 | 2.72 | -0.27 | 0.21 |
192712 | 2.31 | 0.97 | -1.13 | 0.22 |
192801 | -0.43 | 4.26 | -0.75 | 0.25 |
192802 | -1.37 | -2.06 | -0.65 | 0.33 |
192803 | 9.1 | -0.26 | -1.22 | 0.29 |
192804 | 4.45 | 3.98 | 3.44 | 0.22 |
192805 | 1.84 | 2.85 | -3.27 | 0.32 |
192806 | -4.54 | -3.52 | -0.03 | 0.31 |
192807 | 0.94 | -1.32 | -0.5 | 0.32 |
192808 | 7 | -2.06 | -2.15 | 0.32 |
192809 | 3.15 | 2.41 | 0.86 | 0.27 |
192810 | 1.74 | 2.22 | -2.16 | 0.41 |
192811 | 12.19 | -1.78 | 2.7 | 0.38 |