Retrieve data for eight actively managed mutual funds from January 1, 2006 to December 31, 2018. Choose two funds for each category: large cap value, large cap growth, small cap value, small cap growth.

Select a particular fund. Using the guidelines below, explain why you selected a particular fund.

Guidelines:

You can use following measures to justify your selection:

1. Full Time series Sharpe ratio, CAPM alpha, Fama-French 3 factor alpha, Carhart 4 factor alpha, Fama-French 5 factor alpha, a 6 factor alpha based on mkt smb hml mom rmw cma

Choose fund on

2. Rolling Sharpe ratio, 4 Capm alpha, Fama-French 3 factor alpha, Carhart 4 factor alpha, Fama-french 5 factor

alpha, a 6 factor alpha based on mkt smb hml mom rmw cma for each fund. Use at least 36 months of data while

doing so.

3. Downside Risk measures (full TS): downside standard deviation, Downside beta, downside absolute deviation.

Any other criteria that you can think of.

Tips:

1. Calculate the excess net return on funds and performance measures on net returns.

2. Find the factor data on Ken French's website

3. Go to Morningstar to find the funds under each category and retrieve data from yahoo finance

Write following functions in excel.

1. Develop a function to calculate Sharpe Ratio

2. Develop a function to pick the best-performed fund and output fund name.

Tips:

1. For the function to calculate Sharpe Ratio

a) We lose one degree of freedom to use average return to calculate standard deviation. Therefore, instead of

scaling by n, scale by n-1

b) You need to determine whether the dominator is greater than 0

2. For the function to pick the best fund

a) Output your performance measure in vector, directly select from them, and output the name of the fund

Form following portfolios with eight funds you picked and do the following analysis:

a. Find the optimal portfolio without short selling

b. Find the optimal portfolio with minimum fund position of 5% and maximize fund position 40%

Which portfolio performs best? (Tips: you can use above measures to justify your selection)

You are required to submit excel sheets and a write-up. Appearance and organization of the model and report will account

for a significant portion of the grade. Three to five pages should be sufficient (excluding charts and graphs).

Tips for writing:

1. Short summary about the fund that you select (use the yahoo finance or Morningstar summary pages and the fund

website to obtain information).

2. Expense ratios of the fund compare to other funds.

3. Information on the style of the fund (i.e. if it is a growth fund, value fund, small cap fund, high profitability fund,

etc.). You can obtain this information using the "average" factor loadings in 4 factor or 5 factor models above and

the information on the fund website itself. Any comments on industry concentration.

4. Comment on raw fund return vs. the market return. Plot the net excess returns from above against the market

factor.

5. Discuss any of the above performance measures.