Hog Ph Essay

Fund Analysis

1

Below you will find a 2-‐page excerpt of an analysis I completed on fund manager BDV .

Table 1: Risk adjusted alpha, using a single factor model (BDV regressed against S&P)

Table 1 indicates that R-‐square at a high correlation, showing that 84% of the manager’s performance can be attributed to that of the S&P 500. Coefficients in Table 1 are stated monthly, suggesting an annualized alpha of 5%. The t-‐stat is at 2.84, greater than a 95% statistical confidence level, inferring that the coefficient is statistically significant.

Alpha is one of the most important statistical calculations in determining the validity of a fund’s performance. An annualized 5% alpha was found from the single factor model, which is quite impressive,

but a simple analysis relative to the S&P 500 does not suffice in providing an accurate alpha and statistical analysis.

1

Note that the name of the fund manager has been changed for the purpose of this application

Table 2: Risk adjusted alpha, using a multi-‐factor model (S&P, French, Fama, and Cahart)

After running the performance analysis in Table 2 the new monthly alpha is calculated to be 0.0007, annualized at 0.84%. Additionally, the adjusted R-‐square holds a value of 95%, a much stronger correlation than the previous 84%.

The SMB (small cap stocks – large cap equities) coefficient of 0.036 demonstrates that manager BDV

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