Fama-French Model Case Study

Decent Essays
Register to read the introduction… This indicates that momentum and traded liquidity are not the omitted variables and not related to risk factors of mutual funds. Fama-French model cannot be improved though five-factor model.
Compared this three models, Fama-French model has highest adjusted R-square and lowest probability of F-statistic. Therefore, the most suitable model to capture the performance of mutual funds is Fama-French model. However, Fama-French model is not so good. Firstly, the β of ExRm and HML is insignificant, that is to say, the expect return of mutual funds is little related to market premium and stocks value. So it is meaningless to put ExRm and HML into the model. Secondly, the R-square of Fama-French model is low, maybe because the model omits some variables that highly explain the risk premium of mutual funds.
…show more content…
DeMarzo. (2010). <Corporate Finance>, Pearson, 2nd edition

Bodie, Kane & Marcus. < Investments>. McGraw-Hill
Stock & Watson. < Introduction to Econometrics>, Pearson International Edition

Appendix:
Regress of CAPM model Dependent Variable: R | | | Method: Least Squares | | | Date: 12/06/12 Time: 13:24 | | | Sample: 1968M02 2005M07 | | | Included observations: 450 | | | | | | | | | | | | | Variable | Coefficient | Std. Error | t-Statistic | Prob. | | | | | | | | | | | C | -0.005027 | 0.000586 | -8.571419 | 0.0000 | EXRM | 0.011989 | 0.012712 | 0.943093 | 0.3461 | | | | | | | | | | | R-squared | 0.001981 | Mean dependent var | -0.004973 | Adjusted R-squared | -0.000246 | S.D. dependent var | 0.012379 | S.E. of regression | 0.012381 | Akaike info criterion | -5.940885 | Sum squared resid | 0.068673 | Schwarz criterion | -5.922622 | Log likelihood | 1338.699 | Hannan-Quinn criter. | -5.933687 | F-statistic | 0.889424 | Durbin-Watson stat | 2.143090 | Prob(F-statistic) | 0.346142 | | | | | | | | | | | | |

Related Documents

  • Decent Essays

    (2011) Annual Reports and Financial Statements 2010/2011. [online] Available at: http://www.morrisons.co.uk/Documents/Morrisons-Annual-Report-2011.pdf [Accessed: 23 February, 2013] Morrison plc. (2010) Annual Reports and Financial Statements 2009/2010. [online] Available at: http://www.morrisons.co.uk/Corporate/2010/AnnualReport/download-centre/PDFs/full.pdf [Accessed: 23 February, 2013] Moyer, R.C., McGuigan, J.R. and Kretlow, W.J. (2006) Contemporary Financial Management.…

    • 3632 Words
    • 15 Pages
    Decent Essays
  • Decent Essays

    Investment Grade these bonds are issued by low- to medium-risk lenders. A bond rating on investment-grade debt usually ranges from AAA to BBB. Investment-grade bonds might not offer huge returns, but the risk of the borrower defaulting on interest payments is much smaller (Blanco, 2005). Junk Bonds these are the bonds that pay high yield to bondholders because the borrowers don 't have any other option. Their credit ratings are less than pristine, making it difficult for them to acquire capital at an inexpensive cost (Brewer,…

    • 1723 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    Role Project Manager

    • 1236 Words
    • 5 Pages

    Nokes, Sebastian. 2nd Ed.n. London (Financial Times / Prentice Hall): 2007. ISBN 978-0-273-71097-4 • Paul C. Dinsmore et al (2005) The right projects done right!John Wiley and Sons, 2005. ISBN 0-7879-7113-8. p.35 and further.…

    • 1236 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Enron Leadership Analysis

    • 4743 Words
    • 19 Pages

    103-105 Powers, Williams, Jr. (2002), Report of the Special Investigation Committee (of Enron) Enron Corporation, February 1. Cited in: Journal of Management Research by Gyan Chandra, Vol.3, Number 2, p. 25) Prentice, R. (2003) Enron: A brief behavioural autopsy, American Business Law Journal, 40, p.p. 417-444 Sim, 2000, Trevino et al., 2000, Sims and Brinkmann,…

    • 4743 Words
    • 19 Pages
    Decent Essays
  • Decent Essays

    2 (05, 2006): 297-302. http://search.proquest.com/docview/214442876?accountid=8289. Grasso, C. (2008). Deist monster: On religious common sense in the wake of the american revolution. The Journal of American History, 95(1), 43-68,14. Retrieved from http://search.proquest.com/docview/224908302?accountid=8289 Henretta, James A. America: A Concise History, Volume One: To 1877.…

    • 1044 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    B St.Error Beta B Std.Error 1 (Constant) 80.074 115.020 .696 .525 QR -.575 21.820 -.028 -.026 .980 CTR .142 .107 .538 1.329 .255 DTR -5.695 16.658 -.360 -.342 .750 ITR -6.868 3.911 -.761 -1.756 .154 CR .392 8.619 .034 .045 .966 Multiple R=.794(a) R2= 0.630 Adj R2= 0.167 S.E of R= 6.96451 Table : 4 AVOVA Results for ROI Model Sum of Squares Df Mean Square F Sig. 1 330.159 5 66.032 1.361 .3946 194.018 4 48.504 524.177 9 Conclusion : The study on the interrelation between the selected ratios in the arrears of working capital management and profitability of the company revealed both negative and positive association. Out of the nine ratios selected for the study, two ratios, namely QR and CTR registered positive correlation with the selected profitability ratio, ROI. Among these two ratios, the correlation coefficient between QR and ROI and between CTR and ROI were found to be insignificant at 5 per cent level. The remaining seven ratios, namely CR, WCR, CTSR.…

    • 1032 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Reston, Va: Reston Publishing Company 1983. Jones, M. (2006). Management accounting. Chichester: Wiley 2006 Kolb, W.R., & Rodriguez J.R. (1992) Principles of finance (2nd Ed. ), Lexington: D.C. Heath and Company McLaney, E. (2011).…

    • 1801 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    Adding the risk-free government securities would result in a lower beta for the new portfolio. The new portfolio beta will be a weighted average of the individual security betas in the portfolio; the presence of the risk-free securities would lower that weighted average. q. The comment is not correct. Although the respective standard deviations and expected returns for the two securities under consideration are equal, the covariances between each security and the original portfolio are unknown, making it impossible to draw the conclusion stated.…

    • 18054 Words
    • 73 Pages
    Decent Essays
  • Decent Essays

    Performance criteria Table A2 Bonferroni test on rating of performance criteria (pairwise comparisons) (I) factor (J) factor Mean difference (I – J) Std. error Sig. a 391 95% confidence interval for differencea Lower bound Upper bound 0.033 0.474 0.507 0.227 0.243 0.219 0.583 0.441 0.534 0.576 0.281 0.300 0.278 0.661 0.502 0.206 −0.070 −0.052 −0.073 0.279 0.140 −0.146 −0.125 −0.145 0.198 0.069 0.073 0.061 0.481 0.337 0.020 0.470 0.330 0.498 0.355…

    • 9542 Words
    • 39 Pages
    Decent Essays
  • Decent Essays

    Pashardes, P., 1986. Myopic and Forward Looking Behaviour in a Dynamic Demand System, International Economic Review. Wiley, 27 (2) (June), pp.387-397. Weetman, P., 2010. Management Accounting .2nd ed.…

    • 2522 Words
    • 11 Pages
    Decent Essays