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    Document 2 - MLR and Fama-French Model

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    This document summarizes regression analyses of the Fidelity Fund returns against the Fama-French three-factor model of excess market returns (Mkt-RF), small minus big capitalization firm returns (SMB), and high minus low book-to-market equity returns (HML). The regressions show that the three factors significantly explain 95% of the variation in the Fidelity Fund returns, with market returns having a highly significant positive relationship and SMB and HML having marginally significant negative relationships based on t-statistics and p-values. The F-statistic of 697.15 from the analysis of variance table is also highly significant, validating the three-factor model in explaining returns of the Fidelity Fund over the period

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    Document 2 - MLR and Fama-French Model

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    This document summarizes regression analyses of the Fidelity Fund returns against the Fama-French three-factor model of excess market returns (Mkt-RF), small minus big capitalization firm returns (SMB), and high minus low book-to-market equity returns (HML). The regressions show that the three factors significantly explain 95% of the variation in the Fidelity Fund returns, with market returns having a highly significant positive relationship and SMB and HML having marginally significant negative relationships based on t-statistics and p-values. The F-statistic of 697.15 from the analysis of variance table is also highly significant, validating the three-factor model in explaining returns of the Fidelity Fund over the period

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    This document summarizes regression analyses of the Fidelity Fund returns against the Fama-French three-factor model of excess market returns (Mkt-RF), small minus big capitalization firm returns (SMB), and high minus low book-to-market equity returns (HML). The regressions show that the three factors significantly explain 95% of the variation in the Fidelity Fund returns, with market returns having a highly significant positive relationship and SMB and HML having marginally significant negative relationships based on t-statistics and p-values. The F-statistic of 697.15 from the analysis of variance table is also highly significant, validating the three-factor model in explaining returns of the Fidelity Fund over the period

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    17 views2 pages

    Document 2 - MLR and Fama-French Model

    Uploaded by

    jovana.mlnv
    This document summarizes regression analyses of the Fidelity Fund returns against the Fama-French three-factor model of excess market returns (Mkt-RF), small minus big capitalization firm returns (SMB), and high minus low book-to-market equity returns (HML). The regressions show that the three factors significantly explain 95% of the variation in the Fidelity Fund returns, with market returns having a highly significant positive relationship and SMB and HML having marginally significant negative relationships based on t-statistics and p-values. The F-statistic of 697.15 from the analysis of variance table is also highly significant, validating the three-factor model in explaining returns of the Fidelity Fund over the period

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    SKEMA Juliana CAICEDO-LLANO

    Master FMI [email protected]


    Paris-Sophia 2023-2024

    Introduction to Financial Econometrics


    SKEMA
    Document 2

    Multiple linear regression model


    Documents 3 - Fama-French Model

    Figure 1 – Daily factors’ returns Figure 2 – Fidelity Fund


    FF Factors
    Fidelity Fund
    10
    5

    40
    Mkt−RF
    0
    −5

    35
    −15

    30
    500

    Level
    SMB

    25
    300
    100

    20
    0
    10

    15
    5
    HML

    10
    0
    −5
    −10

    0 20 40 60 80 100 120 140


    2002 2004 2006 2008 2010 2012

    Questions 3 - Fama-French Model


    1. For the series in figures 1 and 2, what is the probability distribution ?
    2. How do you interpret the coefficients of the models in figure 3, 4 and 5 ? Are these
    estimations equivalent ?
    3. Which coefficients are significant ? What does a negative sign mean ?
    4. The parameters from the Fama-French three factors model estimated for the returns
    of Fidelity Funds, validate the model ? Which hypothesis tests should be used ?
    5. Calculate the F-statistic with the elements in Figure 6.
    6. Which factor better explains the returns of the fund for the period of analysis ?
    7. If next month returns for the factors are estinated to be 1 %, 0,5% and -1%, what is
    the forecast for the returns of Fidelity Funds and its confidence interval ?

    1
    Figure 3 – Regression - Fidelity Factors FF
    Estimate Std. Error t value Pr(>|t|)
    (Intercept) -0.0074 0.1064 -0.07 0.9446
    DF$Mkt 0.9863 0.0223 44.27 0.0000 Very significant
    DF$SMB -0.0767 0.0400 -1.92 0.0576
    DF$HML -0.0839 0.0338 -2.48 0.0145

    Figure 4 – Regression - Fidelity Figure 5 – Regression - Fidelity


    Model 1
    (Intercept) −0.01 Dependent variable :
    (0.11) FFund
    Mkt 0.99∗∗∗
    (0.02) Mkt 0.986∗∗∗
    SMB −0.08 (0.022)
    (0.04)
    HML −0.08∗ SMB −0.077∗
    (0.03) (0.040)
    2
    R 0.95
    2 HML −0.084∗∗
    Adj. R 0.95
    (0.034)
    Num. obs. 120
    *** p < 0.001, ** p < 0.01, * p < 0.05
    Constant −0.007
    (0.106)

    Observations 120
    R2 0.949
    Adjusted R2 0.948
    Residual Std. Error 1.130 (df = 116)
    F Statistic 721.494∗∗∗ (df = 3 ; 116)
    ∗ ∗∗ ∗∗∗
    Note : p<0.1 ; p<0.05 ; p<0.01
    Figure 6 – Analyse de la variance
    Df Sum Sq Mean Sq F value Pr(>F)
    Regression 3 2739.77 913.26 697.15 0.0000
    Residuals 116 152.04 1.31
    Total 119 2913.13

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