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CHAPTER 12 CASE C-1
CHAPTER 12
THE FAMA-FRENCH MULTI-FACTOR
MODEL AND MUTUAL FUND RETURNS
NOTE: The example below shows the results for returns between October 2010 and September
2015. The actual answer to the case will change based on current market conditions.
1. For a large-company stock fund, we would expect the beta for the market risk premium to be near
one since large company returns account for a large part of the total market return on a market-value
2. The following shows the results of the regression estimates for the period between October 2010 and
September 2015. The actual answer to the case will change based on current market returns.
Fidelity Magellan:
Regression Statistics
Multiple R
0.97626239
4
R Square
0.95308826
1
ANOVA
df SS MS F
Significanc
e F
Regression 3 0.08640 0.02880 379.24369 3.6948E-37
Coefficients
Standard
Error t Stat P-value
Intercept -0.00216 0.00120 -1.79745 0.07766
Fidelity Low-Priced Stock Fund:
CHAPTER 12 CASE C-2
Regression Statistics
Multiple R 0.97094
R Square 0.94273
Adjusted R
ANOVA
df SS MS F
Significanc
e F
Regression 3.00000 0.06939 0.02313 307.29301 0.00000
Coefficient
s
Standard
Error t Stat P-value
Intercept 0.00065 0.00119 0.54383 0.58871
Mkt-RF 0.95742 0.03530 27.12394 0.00000
Baron Small Cap Fund:
Regression Statistics
Multiple R 0.96584
R Square 0.93284
ANOVA
df SS MS F
Significance
F
Regression 3.00000 0.10239 0.03413 259.28367 0.00000
Coefficient
s
Standard
Error t Stat P-value Lower 95%
Intercept -0.00147 0.00158 -0.92967 0.35653 -0.00463
Mkt-RF 1.01454 0.04668 21.73473 0.00000 0.92103
3. This answer will depend on the returns used by the students.
4. If the market is efficient, all assets should have an alpha of zero. In this case, none of the three funds
CHAPTER 12 CASE C-3
5. Once adjusting for risk, we cannot say any of these three funds performed better since all three
alphas are not significantly different from zero at the 5 percent level of confidence, although the
