CHAPTER 11 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 basis.
2.
Fidelity Magellan:
Regression Statistics
Multiple R
0.976262394
R Square
0.953088261
Square
0.950575133
Standard Error
0.008714563
Observations
Regression
Residual
Total
Intercept
SMB
HML
Adjusted R
CHAPTER 11 CASE C-2
Fidelity Low-Priced Stock Fund:
Regression Statistics
Multiple R
0.97094
R Square
0.94273
Adjusted R
Coefficients
Standard
Error
t Stat
P-value
Intercept
0.00065
0.00119
0.54383
0.58871
0.95742
0.03530
0.00000
SMB
0.11224
0.05711
1.96550
0.05432
HML
0.09351
0.06283
1.48837
0.14226
Baron Small Cap Fund:
Regression Statistics
Multiple R
0.96584
R Square
0.93284
Adjusted R Square
0.92924
Standard Error
0.01147
Observations
ANOVA
df
SS
MS
F
Significance
F
Regression
3.00000
0.10239
0.03413
259.28367
0.00000
Residual
0.00737
0.00013
Total
0.10976
Coefficients
Standard
Error
t Stat
P-value
Lower 95%
Intercept
-0.00147
0.00158
-0.92967
0.35653
-0.00463
1.01454
0.04668
0.00000
0.92103
SMB
0.58630
0.07552
7.76379
0.00000
0.43502
HML
-0.12235
0.08308
-1.47266
0.14644
-0.28878
Square
0.93967
Standard Error
0.00868
Observations
ANOVA
Regression
3.00000
0.06939
0.02313
Residual
0.00422
0.00008
Total
0.07361
CHAPTER 11 CASE C-3
4. If the market is efficient, all assets should have an alpha of zero. In this case, none of the three funds
5. Once adjusting for risk, we cannot say any of these three funds performed better since all three alphas