The worksheet “Q1 Factors” has the historical monthly returns of the market factor in excess of the risk-free rate (column “Mkt-RF”), size factor (SMB), value factor (HML), and the momentum factor (UMD). It also has the monthly risk-free rate (“RF”) from February 2005 to March 2021. The worksheet “Q1 Stocks” has the monthly return of four stocks from February 2005 to March 2021: SMG, LGT, SKT, and MST.
1. For LGT, estimate the CAPM beta in one regression, the Fama-French 3 factor betas in another regression, and Fama-French 3 factor + momentum factor betas in another regression. Use all monthly returns for running these regressions.
2. Based on the alpha of the above regression results, how do you evaluate LGT’s performance during the period?
3. Based on the beta estimates in (2), what is LGT’s expected monthly return implied by the CAPM, model, the Fama-French 3 factor model, and Fama-French 3 factor + momentum factor model, respectively? (When computing the expected monthly return, use the monthly factor risk premiums calculated in (1). If a beta estimate is not statistically significant, please don’t set the beta to 0, just use the estimate.)
4. A mutual fund which bills itself as “Small Cap Value” holds LGT in its portfolio. Should they be? Please answer this question only by looking at the appropriate beta exposures of LGT.
5. Next, re-do parts 2-5 for MST.
Q1 Stocks Monthly returns (%) DateSMGLGTSKTMST 2005-0216.6709715446-3.9004243594-0.8991643175-4.2618206321 2005-03-7.1109765861-3.9789288362-1.1079540204-3.6383606668 2005-04-13.462945019221.8768998219-16.41492103864.6752195415 2005-0510.260675147526.0318246775-1.08664926581.9762614273 2005-06-7.41952497096.0879240987-1.5260685659-3.4155630071 2005-0715.8652412945-2.172365059512.47981733643.0998561463 2005-089.9413963488-0.6116174222-3.40284475446.9113238383 2005-0914.331437539510.6503493328-0.2568191707-5.7474986222 2005-107.423984470417.59464036632.0692879437-0.1165746797 2005-1117.76351945798.80582991578.57351908957.7042649126 2005-126.00112924482.4573355573-7.3148518091-5.2505277305 2006-015.03551046294.2906014205-1.0948993947.648153997 2006-02-9.2968269588-16.1882282635-1.3038052512-4.5470445188 2006-03-8.4245712747.5505991573.03719478511.6085049258 2006-0412.22901055047.1641018239-0.1575803068-11.2458725254 2006-05-15.0873719489-11.0350787802-2.9633359158-6.2111426487 2006-06-4.182751448312.7776956603-3.50721198353.2708661033 2006-0718.6659942416-7.80531061870.76806105633.2618084418 2006-08-0.1618987431-2.0874266174.59888553736.8162868019 2006-0913.45621885396.1738785931.60155275956.812163283 2006-105.326043232218.534466102812.68003044724.9724948001 2006-1113.04882304771.7674577803-0.44403423992.264019469 2006-12-7.4405149926-5.01845877296.03263620882.0507518544 2007-011.04900929038.9080953682.05869713953.3489377714 2007-02-1.306422955-10.3788670566-6.2632546407-8.7167882668 2007-039.8096859581.93792802011.7259085872-0.7219128301 2007-047.4158328782.88545233028.43413310467.427358151 2007-0521.43281760825.62815767444.29505226542.5050003797 2007-060.70137294884.9788093229-0.8820807893-3.6641522662 2007-077.9646270345-2.42969447335.130597448-1.6288009779 2007-085.10021482991.02941431175.4586958573-0.8968586259 2007-0910.824661666910.09606980151.3081964382.900282255 2007-1023.770079288124.6320056893-1.426117394424.9491501576 2007-11-4.0694647605-1.9801943173-9.4213664423-8.7204612696 2007-128.703753275-0.21933883353.14080401416.3026896234 2008-01-31.6639814019-18.3924339503-0.9158233952-8.4270141535 2008-02-7.6388688425-16.50185777036.3019582819-16.5643775456 2008-0314.7816090098-6.51768251911.5107849634.7436562945 2008-0421.219527470130.38118433884.82890440760.4932955488 2008-058.50818968482.00421799747.232825059-0.7012828327 2008-06-11.2900568551-10.1365658235-8.0471929575-2.5025611613 2008-07-5.0704559509-10.00532088387.9726359476-6.5067347294 2008-086.6561288919-2.2079130932-4.88356467396.104228753 2008-09-32.9558174894-13.5487516976-3.5442703036-1.8085517356 2008-10-5.340499646-10.2766379017-20.5113038776-16.3357387764 2008-11-13.8674211059-18.4772904728-12.2297419424-9.4491238048 2008-12-7.89902360255.01433212363.7138294004-3.2062670932 2009-015.600480396510.03737734638.8997357855-12.0370192837 2009-02-0.9097655101-0.15950740910.4146371268-5.5555914994 2009-0317.70234185412.97937318965.853595566214.5260807617 2009-0419.701262668713.76487341026.522870634110.2884909602 2009-057.93136527035.36909142582.97448359833.1095434103 2009-064.87446641391.0449874794-1.236904503514.5091620377 2009-0714.71596029585.090250843612.9381162952-1.051710973 2009-082.95001493674.20268770370.101777214.8043631072 2009-0910.18965648747.40355758361.79404532154.9274780731 2009-101.69948614348.12140271340.83603558627.8149106536 2009-116.05306038768.74431487964.75914184266.0584546356 2009-125.41243443986.34305492944.06607983724.0963079029 2010-01-8.8596937029-14.5230532592-6.501150379-7.5459298608 2010-026.5396259511-0.59251263723.89741632741.7388179118 2010-0314.84702453697.65375795171.30828168472.6402758777 2010-0411.1021400599-7.30357789120.5847647684.2676692868 2010-05-1.6124516371-7.6222148328-2.8992108051-15.5205996455 2010-06-2.082673131-8.3767448308-0.9157541668-10.4115823174 2010-072.27407066228.96730059643.984420234212.1686605573 2010-08-5.5004842185-7.1836681831-4.1043247739-9.0662444393 2010-0916.721514543416.83703770319.48157364694.9025741441 2010-106.072206776216.71959079597.05231946188.9015831878 2010-113.3789950386-9.4492406141-1.4902133019-5.2867923834 2010-123.66700531376.88488624814.207641523811.1697716615 2011-015.19593070071.075813938110.3843383963-0.644931369 2011-024.09349884352.172034572-0.0741116628-4.1471451122 2011-03-1.330654711-4.34300739551.1339552373-3.912438745 2011-040.464840504-7.27044004884.60537108442.0874326488 2011-05-0.6569186121-2.771548426-0.9672431752-3.5108333503 2011-06-3.4959658368-4.27961021452.00508055614.6398726334 2011-0716.328533082319.21679472596.00406345615.3846136165 2011-08-1.4469115797-10.3910907392-5.4660398977-2.9197110144 2011-09-0.9120744585-4.79148787972.1647631179-5.8379758567 2011-106.152305807115.06679474675.5813017896.9907598444 2011-11-5.57835272351.13897140261.8252603863-3.9429283511 2011-125.96549247887.7595527839-1.79830080262.2497083007 2012-0112.7110618423-10.18578561364.742230967713.75195935 2012-0218.83108267646.57461207562.14434888437.4839203017 2012-0310.52831915913.71856451176.47204522712.3074139773 2012-04-2.596930026-5.6749386798-0.7524339414-0.7439678872 2012-05-1.0702221974-3.9662785081-6.8476119003-8.838225835 2012-061.0852830096-0.13600489931.81407276155.4838016962 2012-074.58217782569.11958834950.2045249988-3.6613194064 2012-088.92001716488.2341949365-0.57661812024.5809256561 2012-090.7101839510.13151773456.9211067518-2.799632094 2012-10-10.7600236207-9.8343269124-6.2280247999-4.0994707266 2012-11-1.68645298232.6561781608-2.2926957167-6.7273779993 2012-12-8.65904721491.29015078671.21972227121.1625528117 2013-01-14.40888405436.82942402876.01412695152.7705320027 2013-02-3.09339149756.0223153953-1.10312155361.275022223 2013-030.8699313264-0.87493796896.6562933113.7657281046 2013-040.02709655813.825279361-5.044513095315.6938184079 2013-051.5696455245.6574982352.70562019545.4380532436 2013-06-11.24573960961.0502458531-7.6984117314-0.3375219491 2013-0714.12252183620.83828811452.0564202919-7.8170112393 2013-087.6658116867-4.6015197211-6.54736541884.8994922712 2013-09-1.50283762033.4254341442.10439000050.3428360217 2013-109.638158148217.6582045665-3.22389736856.4002446829 2013-116.38414673642.81491393670.26225614197.6814846189 2013-121.47924921665.76827701794.9517656845-1.1442493002 2014-01-10.76968766985.37694281-5.8058514471.1494190546 2014-025.12187356962.93657271024.80530766951.2420922945 2014-032.6058340184-8.27508820644.52299698387.797922257 2014-049.9395980007-5.44194089772.0676949098-1.4393800899 2014-057.2717728866.309577521-6.16383373221.3366175136 2014-063.34018371942.7487498967-1.10357232082.5749314521 2014-072.8731081765-0.639688115.73729329393.5012008292 2014-087.217602357300.32868652275.2595106175 2014-09-1.2184160761.0076929087-0.70064499082.6844562791 2014-107.1960234895-3.1661304874-13.39620608311.2726359131 2014-1110.1203733771-3.0854239057-1.35643972931.8317648244 2014-12-6.7866473586-2.8477573345-0.3896699515-2.2318532688 2015-016.14242238461.5425553254-4.4440390152-13.0247277303 2015-029.64492654184.46755159185.6291436848.5395945383 2015-03-2.7548911533-1.8624635237-0.1939839833-6.6149097985 2015-040.5786497404-1.6760390046.722748249519.6261569713 2015-054.0990540062-0.9733207536-0.9574761261-3.6595219028 2015-06-3.3205763033-2.179995739-3.3946329235-5.170874975 2015-07-3.292672386820.1917298382-0.41187380715.7757837232 2015-08-7.0403909753-1.1764494136-8.7042665465-6.8094591499 2015-09-1.7388644394-1.589974444-1.16065913242.371026543 2015-108.34090274816.8288382796-3.373141253118.9335763283 2015-11-1.00419043314.4723594335-0.47114161143.2484898936 2015-12-10.64195984652.1923013097-0.36516965532.7671483701 2016-01-7.5242365591-2.0991451738-9.3227660822-0.7029528204 2016-02-0.6677489311-6.08116175655.0004292929-7.642048055 2016-0313.33273188256.761538995316.76485679849.3289141537 2016-04-13.9921239261-6.972280175-3.6381935401-9.7048808128 2016-056.52869021336.16296451485.34466545586.2763263476 2016-06-3.6830884538-5.9288855433-0.3221401572-2.777544865 2016-079.006261963911.08076934835.824238626910.7680187125 2016-081.8136687582-0.2263283926-1.08331168681.3761763344 2016-097.1276142681.33498339880.84462268070.8684238029 2016-100.4334267870.9327278371-3.24837442924.0277697613 2016-11-2.6598429346-3.37777560655.55014394780.5674200085 2016-125.33354382971.81784990243.25229405113.8164487525 2017-014.77466212053.23520649555.13887008734.0392562892 2017-0212.88836525113.31581027993.0369128646-1.036327057 2017-035.3236155640.7713676741-2.39300816823.5624707018 2017-04-0.00696850739.2097044438-7.95337784293.9477633484 2017-056.34182173126.5013865479-4.77881171012.0157586325 2017-06-5.3322766903-5.81742489821.7707724824-0.7372439242 2017-073.27040037582.3956533271-5.95462386155.4693254981 2017-0810.26691220360.9489540032-1.13363454572.8473205536 2017-09-5.65534975392.10575278572.5049881910.1563209421 2017-109.68078246345.99827245056.189654085211.6659804045 2017-111.66232111830.4691884964-0.05840999451.1901885282 2017-12-1.17058358452.44662296830.63876001742.1380613708 2018-01-1.063625873211.80618445786.700567739611.0708223578 2018-026.3847295265-5.5737870565-4.8075742976-1.3051048948 2018-03-5.4210112191-6.6025130412-0.5707339002-2.2088865316 2018-04-1.5019691327-1.4014500483-5.52042947192.4651929285 2018-0513.07635898436.6507398651-2.51794054155.6886390584 2018-06-0.55983978292.8258356559-0.04189113430.1997312634 2018-072.79831926749.10769361493.74373810587.5752990564 2018-0819.62269541820.07639542851.06946013255.8917663805 2018-09-0.4825015756-2.02923773774.34439551462.2079020811 2018-10-3.0477477306-9.77820589-23.6624624849-6.6101290598 2018-11-18.40445181721.64009339717.65833121683.8198850865 2018-12-11.3616539087-5.3744932154-7.3648435509-8.0090384801 2019-015.51540632447.798303528318.2545984262.8157946546 2019-024.0314870970.31799932062.76001707417.2776053803 2019-0310.17306321284.76730595963.34032304695.7249683795 2019-045.6435807791.2929166407-0.588234502410.7342868804 2019-05-12.7572506965-7.1393693144-9.4674531567-5.2986313493 2019-0613.4872650395-2.05865832739.88112199778.7127037741 2019-077.639449543912.5607141887.49820703171.7243976439 2019-08-2.0183820082-2.3490216599-8.57394642291.1667913251 2019-097.70381362822.60079325188.56150489731.1844972015 2019-1011.06844932053.3724351928-8.03876637433.1216315401 2019-117.43284108743.55921122230.53839451695.5869487658 2019-1210.20828765192.45678487910.87254500624.5294110653 2020-015.40100193397.27064356157.22918622547.9454564621 2020-02-11.679750164-6.6167926569-9.4482666855-4.8287526975 2020-03-6.7553847178-13.179716933-13.8775583493-2.3882644344 2020-0415.537381448715.98283172413.188483753913.6326213187 2020-058.21648434765.9510927867-0.52562990322.254330202 2020-0615.0492149669-1.071442665-2.009882952611.3652346823 2020-0716.51315934724.90587762791.79681320350.7370561587 2020-0821.437974593810.19717976050.300953557610.0092688006 2020-09-10.0908154408-10.0711104384-0.0380471586-6.5142396969 2020-10-6.0012090710.3028059658-8.2271677045-3.7369750578 2020-119.36064381678.619933198310.62151552455.7292420267 2020-1211.6496661231-0.50319667023.38837782194.1726069232 2021-01-0.5501554284.7868566774-5.37813570394.289184339 2021-02-8.108517192410.9557996282-0.1511167940.18106661 2021-030.88448893741.559748742413.54639563031.6924939804 Q1 Factors Monthly returns (%) DateMkt-RFSMBHMLUMDRF 2005-021.89-0.551.633.180.16 2005-03-1.97-1.352.140.550.21 2005-04-2.61-3.970.05-0.850.21 2005-053.652.8-0.660.430.24 2005-060.572.552.822.060.23 2005-073.922.87-0.83-0.030.24 2005-08-1.22-0.981.382.270.3 2005-090.49-0.660.743.450.29 2005-10-2.02-1.190.45-1.30.27 2005-113.610.97-1.160.270.31 2005-12-0.25-0.460.240.760.32 2006-013.045.40.992.680.35 2006-02-0.3-0.37-0.26-1.840.34 2006-031.463.490.681.260.37 2006-040.73-1.412.370.610.36 2006-05-3.57-3.092.45-3.650.43 2006-06-0.35-0.360.921.470.4 2006-07-0.78-3.992.67-2.220.4 2006-082.031.02-1.98-3.460.42 2006-091.84-1.29-0.04-0.950.41 2006-103.231.72-0.3-0.240.41 2006-111.710.780.07-1.010.42 2006-120.87-1.142.720.840.4 2007-011.40.16-0.690.180.44 2007-02-1.961.29-0.17-1.360.38 2007-030.680.08-0.832.50.43 2007-043.49-2.18-1.38-0.150.44 2007-053.240.27-0.63-0.270.41 2007-06-1.960.78-1.10.390.4 2007-07-3.73-2.45-3.552.810.4 2007-080.92-0.17-1.910.10.42 2007-093.22-2.22-2.214.570.32 2007-101.80.25-2.914.880.32 2007-11-4.83-2.8-10.90.34 2007-12-0.870.14-0.596.540.27 2008-01-6.36-0.893.67-7.880.21 2008-02-3.09-0.27-0.886.110.13 2008-03-0.930.790.144.10.17 2008-044.6-1.59-0.96-0.330.18 2008-051.863.05-1.453.210.18 2008-06-8.441.22-2.7712.540.17 2008-07-0.772.475.27-5.130.15 2008-081.533.541.45-4.030.13 2008-09-9.24-1.186.070.360.15 2008-10-17.23-2.52-2.377.790.08 2008-11-7.86-2.82-6.317.170.03 2008-121.743.510.14-5.070 2009-01-8.120.33-11.12-1.820 2009-02-10.10.23-7.034.030.01 2009-038.9503.4-11.610.02 2009-0410.185.145.21-34.390.01 2009-055.21-2.630.49-12.470 2009-060.432.63-2.625.30.01 2009-077.721.94.87-5.370.01 2009-083.33-1.17.5-8.820.01 2009-094.082.410.89-4.950.01 2009-10-2.59-4.18-4.032.660 2009-115.56-2.48-0.250.330 2009-122.756.13-0.112.910.01 2010-01-3.360.370.33-5.360 2010-023.41.193.193.630 2010-036.311.442.113.710.01 2010-0424.862.913.210.01 2010-05-7.890.14-2.39-0.170.01 2010-06-5.57-1.84-4.52-2.990.01 2010-076.930.18-0.361.90.01 2010-08-4.77-3.02-1.9-0.180.01 2010-099.543.93-3.231.350.01 2010-103.881.07-2.461.660.01 2010-110.63.78-0.952.540.01 2010-126.820.683.64-3.180.01 2011-011.99-2.520.82-0.290.01 2011-023.491.531.292.080.01 2011-030.462.58-1.763.520.01 2011-042.9-0.37-2.430.060 2011-05-1.27-0.58-2.05-0.570 2011-06-1.75-0.11-0.421.770 2011-07-2.35-1.37-0.88-0.010 2011-08-5.99-3.03-2.56-0.340.01 2011-09-7.59-3.35-1.71-2.520 2011-1011.353.320.13-1.440 2011-11-0.28-0.14-0.484.010 2011-120.74-0.661.681.980 2012-015.052.1-0.9-7.940 2012-024.42-1.840.46-0.280 2012-033.11-0.681.211.510 2012-04-0.85-0.39-0.773.830 2012-05-6.190.16-1.046.630.01 2012-063.890.780.58-0.760 2012-070.79-2.62-0.053.10 2012-082.550.471.12-2.470.01 2012-092.730.491.56-1.060.01 2012-10-1.76-1.093.610.080.01 2012-110.780.53-0.830.40.01 2012-121.181.453.53-2.950.01 2013-015.570.360.98-1.90 2013-021.29-0.420.131.310 2013-034.030.75-0.231.960 2013-041.55-2.40.530.270 2013-052.81.662.61-1.740 2013-06-1.21.16-0.090.580 2013-075.651.860.561.780 2013-08-2.710.29-2.660.020 2013-093.772.89-1.152.960 2013-104.18-1.531.210.170 2013-113.131.190.290.440 2013-122.81-0.59-0.050.070 2014-01-3.320.87-2.021.740 2014-024.650.31-0.362.050 2014-030.43-1.854.9-3.380 2014-04-0.19-4.211.12-3.770 2014-052.06-1.9-0.121.210 2014-062.613.08-0.670.740 2014-07-2.04-4.270.02-0.240 2014-084.240.36-0.420.790 2014-09-1.97-3.73-1.380.440 2014-102.524.28-1.8-0.040 2014-112.55-2.04-3.071.060 2014-12-0.062.482.231.090 2015-01-3.11-0.51-3.563.810 2015-026.140.52-1.81-2.830 2015-03-1.123.02-0.4130 2015-040.59-3.041.88-7.320 2015-051.360.89-1.16.030 2015-06-1.532.85-0.743.070 2015-071.54-4.09-4.2110.290 2015-08-6.040.442.73-2.090 2015-09-3.07-2.610.395.350 2015-107.75-1.98-0.25-4.030 2015-110.563.68-0.492.210 2015-12-2.17-2.86-2.453.410.01 2016-01-5.77-3.362.011.340.01 2016-02-0.080.83-0.59-4.060.02 2016-036.960.821.11-5.130.02 2016-040.920.693.28-6.260.01 2016-051.78-0.27-1.62.140.01 2016-06-0.050.64-1.44.110.02 2016-073.952.6-1.23-3.080.02 2016-080.51.133.31-3.170.02 2016-090.252.04-1.21-0.530.02 2016-10-2.02-4.434.070.690.02 2016-114.865.478.22-4.070.01 2016-121.820.113.51-0.380.03 2017-011.94-1.06-2.81-0.980.04 2017-023.57-2.01-1.79-1.630.04 2017-030.171.17-3.33-0.920.03 2017-041.090.72-2.110.440.05 2017-051.06-2.61-3.671.460.06 2017-060.782.151.45-0.320.06 2017-071.87-1.47-0.361.660.07 2017-080.16-1.62-2.193.550.09 2017-092.514.473.14-1.180.09 2017-102.25-1.950.124.30.09 2017-113.12-0.58-0.09-0.710.08 2017-121.06-1.290.17-1.630.09 2018-015.58-3.09-1.323.940.11 2018-02-3.650.3-1.013.970.11 2018-03-2.354.05-0.12-1.280.12 2018-040.291.130.50.270.14 2018-052.655.28-3.153.80.14 2018-060.481.19-2.31-2.380.14 2018-073.19-2.210.57-1.670.16 2018-083.441.15-3.925.220.16 2018-090.06-2.28-1.63-0.060.15 2018-10-7.68-4.783.46-1.840.19 2018-111.69-0.710.34-1.330.18 2018-12-9.55-2.48-1.891.850.19 2019-018.412.89-0.46-8.650.21 2019-023.42.12-2.710.860.18 2019-031.1-3.05-4.192.140.19 2019-043.96-1.752.02-2.550.21 2019-05-6.94-1.18-2.287.60.21 2019-066.930.22-0.79-2.140.18 2019-071.19-2.080.342.720.19 2019-08-2.58-2.4-4.857.640.16 2019-091.43-1.056.77-6.850.18 2019-102.060.24-1.880.290.15 2019-113.870.91-2.05-2.60.12 2019-122.770.671.91-2.270.14 2020-01-0.11-3.08-6.275.430