This is a paper that focuses on the conducting a regression analysis in CAPM and Fama French. The paper also compares the calculation of the two factors in terms of differences.
Conducting a regression analysis in CAPM and Fama French
Description of Project
Choose an open-end fund.
Firstly, collect past 5 years of monthly returns into Excel. (January 2015 to January 2020). You will need to also collect adjusted closing price from YahooFinance. (To get a return for January 2015 you will need price for December 2014).
Do a regression analysis in 2 different ways: CAPM, and Fama French 3 factor. For each of these two regressions the dependent variable will be the excess return of the fund. Discuss alpha, and market beta for the 2 models. In addition, discuss coefficients on HML and SMB for 3-factor modeling.
For each modeling, discuss the F statistic; discuss the signs and significances of the alpha and coefficients. Based on the Jensen’s Alpha, offer an opinion as to whether the management of the fund is adding value (superior risk-adjusted returns). According to your analysis, is there evidence that the fund is a value fund or growth fund? Or a small-cap fund or a large-cap fund?
Compare your calculated CAPM beta with the beta reported on Yahoo Finance. Discuss differences you find between CAPM and FF regressions. Discuss your results with regard to the fund’s name or marketing. Also, discuss in a 2-3-page write-up. SMB, HML and MRP can be found at the Ken French data site but I will post on Brightspace.
Data on MRP, HML, SMB and RF will be in the data file on Brightspace. Use this data from Brightspace so I can more efficiently assess your work. (Ken French data will occasionally retroactively change.)
Investorguide.com has a list of mutual funds.
Acceptable to work in teams of 1–3 (need to have 4?? Ok for 10% penalty).
Submission: You (your group) will submit 2 files through the Brightspace dropbox: 1) an Excel file and 2) a Word file. The Excel file should show the data and calculations required. The Word file will discuss the results and complete written portion of assignment.
Writing the minimum number of pages in itself does not fulfill assignment if important analysis is left out.