这是一篇来自英国的关于金融计量经济学的经济代写

Assessment Information – What you need to do

This assignment is an individual assignment.

You are the equity analyst for F&H Capital, a global investment firm located in New York. Your main task is to track the US and global equity markets and make recommendations to the trading departments. On this specific occasion, you are asked to provide an “Equity Research Report” on a portfolio of equities, exchange-traded funds (ETFs) and mutual funds.

There are two asset pricing models that the firm uses in assessing the predictability of the securities. These models are the Capital Asset Pricing Model (CAPM) and the Fama-French Three-Factor model.

The empirical CAPM is specified as follows:

𝑅𝑅𝑥𝑥𝑥𝑥 = 𝛼𝛼 + 𝛽𝛽1𝑅𝑅𝑚𝑚𝑚𝑚 (1)

where:

𝛽𝛽1 is the market beta of portfolio X; 𝛼𝛼 is the intercept term.

𝑅𝑅𝑥𝑥𝑥𝑥 = (𝑅𝑅𝑐𝑐𝑐𝑐 − 𝑅𝑅f𝑡𝑡) defines the excess return on the portfolio X at time 𝑡𝑡

𝑅𝑅𝑚𝑚𝑚𝑚 = ( 𝑅𝑅𝑚𝑚𝑚𝑚𝑚𝑚 − 𝑅𝑅f𝑡𝑡) defines the market premium (return on the market portfolio – S&P 500 index) at time 𝑡𝑡.

𝑅𝑅𝑐𝑐𝑐𝑐, 𝑅𝑅𝑚𝑚𝑚𝑚𝑚𝑚 and 𝑅𝑅𝑓𝑓𝑓𝑓 are the return on portfolio 𝑐𝑐, market index 𝑚𝑚𝑚𝑚 and the risk rate, respectively.

The empirical Fama-French Three-Factor model is specified as follows:

𝑅𝑅𝑥𝑥𝑥𝑥 = 𝛼𝛼 + 𝛽𝛽1𝑅𝑅𝑚𝑚𝑚𝑚 + 𝛽𝛽2𝑆𝑆𝑆𝑆𝑆𝑆𝑡𝑡 + 𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝑡𝑡 (2) where:

𝑆𝑆𝑆𝑆𝑆𝑆𝑡𝑡 = Excess return of small cap over high cap firms at time 𝑡𝑡

𝐻𝐻𝐻𝐻𝐻𝐻𝑡𝑡 =Excess return of value stock over growth stock at time 𝑡𝑡

The details of your report are itemized below.

SECURITY SELECTION AND PORTFOLIO CONSTRUCTION

1. From Yahoo Fund Screener, select ten (10) securities from the following class of assets.

 Three (3) equities listed on the NYSE or NASDAQ

 Three (3) exchange-traded funds (ETF) listed on the NYSE or NASDAQ

 Four (4) mutual funds domiciled in the US

2. For each security, download the daily adjusted close price series from 1 January 2005 to 30 June
4. Transform the daily price series to the monthly price series for each fund in your portfolio.
5. Transform the monthly price series to return series.
6. Construct a portfolio with the ten securities you picked using the following weights.

 Equities – 30%

 Exchange-traded funds (ETF) – 30%

 Mutual Funds – 40%

[Hint: This is equivalent to setting the weight of each security to 10%]

6. Set the rebalancing of your portfolio to one (1) year.

TIME SERIES VISUALISATION

7. Plot the monthly price series of your portfolio
8. Plot the monthly return series of your portfolio

9.Discuss the patterns you observe in the price and monthly series. The discussion should use relevant underpinning theories and economic events that explains the pattern observed.