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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
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
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
Coefficients
Standard
Error
t Stat
P-value
Lower 95%
Intercept
-0.00147
0.00158
-0.92967
0.35653
-0.00463
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
