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

BUSI 301 Discussion Assignment Instructions Overview Discussions bring dialogue and communication into our learning experience. Unlike so much of the unsubstantiated opinion we see in the public square and social media, these discussions provide a space for in-depth analysis and application of the topics in our Learn readings and presentations.

Financial worksheet

See doc below Applying CQI Principles in Foodservice Management In this assignment, you will evaluate real-world foodservice operations through the lens of Continuous Quality Improvement (CQI), applying models like PDCA and FOCUS, while developing systems-thinking, problem-solving, and leadership skills aligned with RD exam content. The final version of the assignment

ACC 5301 V DB R1

2 Management Applications of Accounting ACC 5301 DB V Reply 1 Post 2: Response post to a classmate 250 words in length •   Your post should include at least one APA-formatted scholarly, professional, or textbook reference with accompanying in-text citation to support any paraphrased, summarized, or quoted material. Top of Form

ACC 5301 Unit V DB

2 Management Applications of Accounting ACC 5301 DB V Post 1: Initial post addressing the discussion board topic is due by the end of day on Saturday. •   Your initial post should be at least 300 words in length. •   Your initial post should include at least one APA-formatted scholarly, professional, or

business management

EC203 Term Paper- Company Analysis This paper provides the opportunity to apply Microeconomic concepts to the analysis of a company of your choice. Paper Guidelines 1 . Company selection. Choose a company that interests you. To ensure that you have sufficient data for analysis, choose a publicly traded company (Fortune

Appraisal of Real Estate

Using the internet, determine the levels of appraisal licensure in your state and outline the requirements for each. Hint, try the real estate commission web site for your state. This needs to be detailed. What are the professional designations available to appraisers? What are the requirements for each designation. Try

BizBen The Leading Platform in the USA for Buying and Selling Businesses

  Buying or selling a business in the United States requires accurate information, verified listings and access to serious buyers and sellers. BizBen has become one of the most trusted business-for-sale platforms in the USA because it provides an organized and transparent marketplace where entrepreneurs, investors and business brokers can

ACC 5301 IV A

2 Management Applications of Accounting ACC 5301 Unit IV Assignment This assignment measures your mastery of ULOs 1.1, 1.2, and 5.1. Assignment Objective: For this assignment, you will research and compare international and U.S. accounting standards. This will enable you to see how the different reporting methods affect business and

HRM 6303 V DB

2 Training and Development HRM 6303 Unit V DB Initial post to be a minimum of 500 words in length and at least one supporting reference. How has culture influenced your experience in a learning environment? Can you share any examples?

truckers of europe 3 mod ios

 The MOD version removes all limits, allowing you to instantly upgrade your garage, buy top-tier European trucks, and customize them easily. Whether you want to drive across highways, transport cargo, or explore new routes, the MOD gives you everything from the start. The physics in the game feels real, with

Healthcare Outreach Activities

Discuss one of the public healthcare agencies or organizations in your community and their community outreach efforts. Consider questions such as: How do they reach people? Whom do they partner with? Who funds them? What programs do they provide and whom do they serve? Support your response with at least

Current Event

Instructions attched 1. Select a Recent Event: ○ Choose a current event (within the last 12 months) that relates to strategic management. This could be a major corporate decision, a significant shift in market dynamics, a merger or acquisition, a strategic partnership, etc. 2. Research the Event: ○ Gather information

econ

Instructions and reading attached.  Answer the following questions. 1. What issue or issues were in conflict in the 2022 nationwide rail negotiations? Ultimately, Congress and President Biden imposed a contract settlement on the unions rather than allow the workers to strike. What factors led to this outcome, from your perspective?

wk3 – DLF

>> Your company is planning to undergo a major transformation by moving to a digitized based operation using artificial intelligence or AI and automation to improve service. The transformation has three parts, people, process, and technology. You have been hired as the new division manager to oversee the people part

Mis3

Welcome to week three. This week, your goal is to step outside the building, figuratively or literally, and talk to real users. You’ll use what you learn to synthesize key patterns and insights that will guide your product. Customer discovery is not about confirming your idea. It’s about challenging it.