FIN 614 Winter 2014 Group Assignment 2 Due: Friday March 20 at 5:00 PM

Instructor: G. Smith

There is a companion Excel workbook (FIN 614 W15 Assignment 2.xlsx) that contains the data you require to do the work noted below. You are to do your work on this spreadsheet and then to post a modified version of it on uLearn as your submission of the assignment. For some questions below, there are obvious places in the spreadsheet for you to place your answer. You will usually need to do intermediate calculations. Please endeavor to make you work easy to follow. Ensure that your methodology is clear. To submit, one group member (not all) will post a spreadsheet on uLearn, ensuring that you have completed the following checklist before doing so: • • Before posting, ensure that group member names are entered onto the worksheet tab “Tally Sheet”. When posting please rename the workbook so that it includes the family names of the group members. For example, if Smith, Jones, and Brown work together, their submission would be named “Smith Jones Brown Assignment 2.xlsx”

There are 20 available points on this assignment. Your tasks are as follows: 0) Please enter group member name and ID information on spreadsheet tab “Tally Sheet”. 1) Factor models, Fama-French factors, and active management: You will find monthly excess return series for 3 actively managed portfolios on tab "Q1". You will also find excess returns for a market capitalization weighted index and returns on the Fama-French (FF) factors SMB and HML. You will likely want to review the text’s discussion of FF starting on p. 399. a) Comment on the excess returns of the three active portfolios relative to those of the market cap index. How do they compare to those of the index? Considering the index alone as a benchmark, do the managers of the respective funds appear to demonstrate any skill? [3 points] b) The