Problem 2

In this problem you are going to work with some real-world data. File mfunds_data.xlsx contains historical returns of three mutual funds

Ticker Fund name Investment style

DFUSX DFA U.S. Large Company Portfolio Large-Cap

LADYX Lord Abbett Developing Growth Fund Small-Cap Growth

VSGIX Vanguard Small-Cap Growth Index Fund Small-Cap Growth

from Morningstar Direct. For your convenience, I included data on the Fama-French research factors in the same file.

a. [1pt] Calculate average returns for the funds we are interested in.

1 b. [3pts] Estimate the CAPM for the funds: ri rf = i + i(rmkt rf ) + i Note: dont forget to use excess returns (not returns) on the left-hand side of your regression! Report the CAPM alphas, their t-stats, and the CAPM betas. Note: you dont need to report all the output you got from the Analysis ToolPack or your favorite statistical software.

c. [1pt] Which fund had the highest CAPM alpha? Is this alpha statistically significantly different from zero?

Data wont fit unless there is way to submit an excel sheet