Determine the Sharpe Ratio, the M-measure of Performance - Report Writing - Accounting and Finance Assignment Help

Assignment Task:

Task:

For this assignment, you are required to read carefully the detailed description of the data available in the webpage where the Kenneth French’s data library is hosted, and make all required below. In other words, please do not ask for help in obtaining the data as you are expected to be able to do this autonomously based on what you are learning in the course, and testing this ability is one of the aims of the assignment. Carry out the following tasks (for some of which you might find useful to avail of the LINEST function in Excel or similar):
1. Determine the Sharpe ratio, the M-measure of performance, the Jensen's alpha and the appraisal ratio of the mutual fund, under the assumption that the CAPM with the stock market as the sole risk factor is the correct asset pricing model.
2. Next, repeat the above analysis under the assumption that the Fama & French 3- factor model is the correct asset pricing model.
3. Next, repeat the above analysis adding the momentum factor (also from Kenneth French’s data library) to the Fama & French 3-factor model.

4. From the Kenneth French’s data library, choose a portfolio sort that you deem representative of the investment opportunity set and test the CAPM, the 3-factor Fama & French model and the 4-factor model represented by the 3-factor Fama & French model with the addition of the momentum factor, making appropriate choices about issues such as the sample size. To carry out the testing, use both first pass SCL-type time-series regressions and two-pass regressions. Summarize your findings in a table like those used by financial economists (e.g., Fama and French) in their scientific articles and discuss the implications of your results for asset pricing theory and portfolio management.

5. Use the SIM combined with the approach of Treynor and Black to find the optimal portfolio under the assumption that your investment opportunity set includes only the above three mutual funds alongside a passive index, which represents your asset allocation benchmark.

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