Problem 3: Fund Manager Performance Measurement (25 points) Using Net Asset Value (NAV) and other relevant data, you investigate the Table 2. Regression results of M, P, and S Funds based on the Fama-French Three-Factor Model (all necessary autoregressive terms are already applied but performance of three fund managers: M, P, and S. You utilize the following not reported). S regression model for all fund managers: Coefficient Coefficient Coefficient (Standard Error) (Standard Error) (Standard Error) [pri's = ap + Bp(I'mr 's) + Epi Intercept -0.0005 0.0069 0.0016 (0.0011) (0.0034) (0.0013) Ipt = portfolio return at month-t 1.0286 TA = riskless return at month-t MRP 0.8572 1.0104 (0.0198) (0.0502) (0.0233) market return at month-t 0.0888 -0.2345 Epi = regression residuals which are expected to be white noise SMB 0.0725 (0.0382) (0.1058) (0.0449 HML -0.0063 0.2195 0.0065 The regression results are presented in Table 1. (0.0259) (0.0659) (0.0306) Table 1. Regression results of M, P, and S Funds (all necessary autoregressive Standard Error of Regression 0.0109 0.0254 0.0128 terms are already applied but not reported). S Coefficient Coefficient Coefficient Adjusted-R 0.9750 0.8784 0.9649 (Standard Error) (Standard Error) (Standard Error) Intercept 0.0001 0.0074 0.0021 As an academic you are asked to answer the following questions: (0.0011) (0.0041) (0.0016) (a) Based on Table 1, which fund(s) is (are) able to provide positive and MRP 0.9976 0.9693 1,0030 significant alpha(s)? Explain. (5) (0.0157) (0.9693) (0.0199) (b) Based on Table 1, what is the information ratio of fund S? (5) Standard Error of (c) Based on Table 1, which fund is the most aggressive and defensive? Regression 0.0111 0.0281 0.0128 Explain. (5) (d) Based on Table 2, does the same result in (a) still hold? Explain. (5) Adjusted-R? 0.9740 0.8509 0.9651 (e) Which fund performs the best? Why? (5) Note: MRP = I'mrlift Note: All tables present the standard error of coefficients instead of t-statistic of coefficients. Hence, you need to calculate the t-statistics before you can properly To check the robustness of the results, you perform further regressions based on answer the questions. the Fama-French Three Factor Model. The results are presented in Table 2