Our Services

Get 15% Discount on your First Order

[rank_math_breadcrumb]

H3

Factor Models

Unless stated otherwise, round your answers to three decimals, and do not round intermediate calculations.

Fama-French Three-Factor Model.

In this problem, you will analyze the risk-factors associated with some stocks in your portfolio. To limit the amount of work, consider only the three largest holdings in your portfolio by market value.

Download the Excel spreadsheet. The file contains the monthly
excess returns in percent for a wide range of stocks and for QQQ (Nasdaq ETF), IWM (Russell ETF), and MCHI (China ETF). Additionally, the file contains the time series
ExcMkt,
SMB,
and
HML, representing the excess market return, the small-minus-big return, and the high-minus-low return – these are the factors of the Fama-French Three-Factor model.

Since not all companies are going to be available in the Excel file, we cannot use them for our analysis. Please research the QQQ, IWM, and MCHI ETFs to see if you can use them as a replacement for missing stocks. For example, Alibaba (BABA) has not been listed for the entire time period we will study. However, MCHI can serve as a decent albeit not perfect replacement in your analysis. (If none of these fit, do not use the stock and instead include your next-largest holding.)

With your three largest positions and the data from the Excel file, solve the following problems:

a) Calculate using the single-factor model.

b) Estimate their risk (systematic and firm-specific) according to the single-factor model.

c) Calculate the weights of the stocks in your portfolio. Remember, stocks you’re selling short have negative weights, and the weights need to sum up to one.

d) Produce a return time series for your portfolio of the largest three stocks, using . Estimate your portfolio’s sensitivity to Fama-French’s three factors, that is, run the regression

Remember: is a proxy to how much market risk your portfolio carries; is your exposure to small over big firms; is your exposure to firms with a high book value compared to their market capitalization. These three betas are assumed to be non-diversifiable risk factors, and in the long run investors should be rewarded for their risk of having greater betas.

e) Analyze your results. This includes, but is not limited to: classifying your portfolio in terms of aggressiveness, small vs large cap, value vs growth; identifying which of your holdings potentially contribute to the portfolio classification how; going back to your portfolio philosophy statement and discussing if your holdings reflect your investment goal; using the expected values of to compute the expected return of your portfolio in the coming month.

Share This Post

Email
WhatsApp
Facebook
Twitter
LinkedIn
Pinterest
Reddit

Order a Similar Paper and get 15% Discount on your First Order

Related Questions

Business Management

Becoming a leader, values-based 3109.1.1 : Develops Self-Awareness and Personal Values The learner identifies their personal values, including honesty, integrity, respect, emotional intelligence, and ethical responsibility, to develop self-awareness through self-assessment. 3109.1.2 : Describes How Interpersonal Skills Are Applied in Leadership The learner describes how interpersonal skills are applied to

Business Management

Develops an Employee Selection Strategy  3114.4.3 : Develops an Employee Selection Strategy The learner develops a strategy for selecting and onboarding employees. Introduction Human resources (HR) professionals enable current and future organizational competitiveness by maintaining an adequate supply of people with the knowledge, skills, abilities, and other characteristics needed to

Business Management

Evaluates Workforce Planning Responsibilities  3114.4.2 : Develops a Recruitment Plan The learner develops a plan for recruiting qualified employees to meet organization needs and goals. Introduction Human resources (HR) professionals enable current and future organizational competitiveness by maintaining an adequate supply of people with the knowledge, skills, abilities, and other

Business Management

Talent Acquisition  3114.4.1 : Evaluates Workforce Planning Responsibilities The learner evaluates capacity forecasts, job requirements, and job descriptions. Introduction Human resources (HR) professionals enable current and future organizational competitiveness by maintaining an adequate supply of people with the knowledge, skills, abilities, and other characteristics needed to produce these resources. As

Innovative and Strategic Thinking

Risk Analysis Risk Analysis Techniques of Strategic Management The graduate utilizes evidence-based techniques to make strategic decisions. Business Strategy and Analysis The graduate applies appropriate business practices to formulate recommendations that impact organizational effectiveness. Introduction Today’s business environment requires competency in managing risk and selecting business strategies based on a

Climate Change Efforts

Please respond to the following: Consider what you learned about how COVID-19 shutdowns affected air quality. What can these events teach us about efforts to control global climate change? What do you think are fair and realistic expectations of the world’s more-developed and less-developed countries in this effort? Be sure

Assignment 3

Assignment 3 Problem Solving: Seeking Solutions for Leadership Issues Write a 6-page paper. No more than 7. Due 2/24/2026 Use open access articles Drawing from the course readings, assignments, discussions, and additional research, students are expected to integrate course content into a comprehensive examination of the leadership challenges they face. Students

LZ A2

Assignment 2 Assignment Instructions For this assignment and any others that require research you must answer in your own words and cite your references correctly . A cut-and-paste answer will earn a zero for the entire assignment and may earn a course grade of F for plagiarism. Part 1: In

business

INDS 491 Discussion Assignment Instructions The discussions in this course are meant to be collaborative learning experiences that foster a spirit of community and collegiality, but you must also view these as academic assignments with formal requirements. For these discussions, you are required to submit a thread in response to

business

INDS 491 Topic and Research Question Assignment Instructions Overview This assignment is a two-part assignment that gives you the chance to get instructor feedback on your first draft so you can improve it for the second draft and then get more feedback so you can improve it as you begin

Prof Double R

  Directions Initiative Materials Your initiative needs professional materials to support it. Create one or more relevant products that address all of the required elements: Explain how your topic—either the juvenile justice system or allied professionals—relates to the law enforcement branch of the criminal justice system. Include information from one

Business Finance – Accounting Week Four Assignment 7.

Assignment 7: Describe Corporate Governance Top of Form Instructions (CLO:  5, 8)  · Complete Chapter 13:  Mini-case (pp. 559-560).  Complete the above textbook assignment and submit in Brightspace using a Word document.  Length: This assignment must be long enough to completely answer the question.  Bottom of Form

BUSINESS( NO PLAGARISM A+ WORK, ON TIME)

Discussion Tutor 1 IG ( Respond no more than 150 words) Hello Everyone At first glance, this situation looks like a simple “highest bidder wins” scenario. But contract law is not about who offers the most money. It is about whether a binding agreement was formed and when that happened.

A family plan

   A family plans to purchase their first home in 5 years. To afford the monthly payments, the couple estimates they will need a down payment of $150,000 at that time. Assuming they can earn 7% of their investment, how much money will they need to deposit today?

Advance Auditing

Please review the assignment attached. I live in the caribbean region, therefore I prefer information/sources being used to not be that far out of the region.. I am okay with the USA and UK material.  additional information to assist with the assignment and every aspect of MSC level work and

Unit VI GSM

See Attached Unit VI Assignment Strategic Expansion of a Multinational Firm into a New Global Market This assignment measures your mastery of ULOs 4.2, 5.1, and 5.2. This assignment will help you develop strategic decision-making skills crucial for global business management and the successful expansion of multinational enterprises into new

Total Quality Management Discussion 5

This is the problem from week 1 I went with    One issue at the Cook County Courthouse that could benefit from quality improvement is invoice processing and how long it takes vendors to get paid. Cook County uses Net 60 payment terms, while many private companies operate under Net

SCMG201

see attached 5 Assignment 2 – Weeks 3 & 4 Essay Questions SCMG 201 – Principles of Supply Chain Management Enter Student Name Enter Date Chapter 3: Network and Systems Design (Questions 1 through 5) Question 1 Response: Question 2 Response: Question 3 Response: Question 4 Response: Question 5 Response: