Portfolio Management
Homework 2
LAST NAME: ______SURNAME: ______
Answer the following questions by copying and pasting results in the appropriate space. Use the same spaces to write comments when required.
Instructions: Go to
and look for data on one Italian equity mutual fund for which you can find at least 10 years of monthly data (i.e., the data should be in existence since at last early 2008). Of course, there is nothing special about using yahoo finance, any source of data will work (e.g., Bloomberg), provided it will provide enough information and a sufficiently long time series to answer what follows. Make sure to compute returns on each share of the fund and not to use prices.
Each student will need to work on a different data set – in the case of identical, multiple data sets, the total scored assigned will be divided among students (for instance, 18% divided by 3 students gives them 6% each, not really worth it). All questions require you to copy and paste your results in this word file. Question 4 requires that you copy and paste an Excel table.
By the stated deadline (26th April 2017), please send an email to Prof. Guidolin (at ),to include a Word or pdf file containing your answers. The file should contain your name and surname in the file denomination. No exceptions – failure to indicate your name will mean to imply you want to remain anonymous and receive zero grade.
- Please indicate the complete name of the fund, its ISIN code (e.g., the code that goes like IT0001036315.MI), the currency of denomination of the fund, who’s managing the fund and since when, the Morningstar “stylebox” classification, the category/classification to which the fund belongs to, and the starting and ending date of the data series on the value of the fund’share.
- Compute the Sharpe ratio of the fund and compare it to the Italian equity market index analyzed in the lectures. What is the limitation of using the Sharpe ratio to assess the quality of the management applied to this fund? What is the Treynor ratio of the fund and why would using this ratio be more sensible and when? Is this fund located above, on, or below the Security Market Line that a domestic version of the CAPM implies?
- Estimate the Jensen’s alpha (under a single-state CAPM-style model) and the information ratio for your fund. How do these compare the average vs. the best Jensen’s alphas and information ratios found in the 13-funds examples discussed during the lectures?
- Perform a Fama’s performance decomposition similar to what we have performed during the lectures. Please copy and paste (as an image, to simplify matters) the same table as we have used during the lectures to obtain a performance decomposition adding a column to represent your fund. Over time, did the fund’s management show cross-sectional net selectivity or diversification skills? did the fund’s management show a time-series timing skill?
More importantly, do you think that the management of the fund has been creating value? Is the monthly value added by the fund’s management worth the management fees that the fund is charging?