The questions in the document

Question 1:

Identify and interpret the current signals from leading and lagging economic indicators.

Choose 2 leading indicators and briefly explain why you chose them and what they predict about where we are in the business cycle. (8 pts)

Question 2:

You have constructed a portfolio consisting of 70 percent Stock A and 30 percent T-bills. Stock A has an expected return of 15 percent and a standard deviation of 25 percent. The T-bills have a return of 3 percent. Compute the expected return and standard deviation of your portfolio returns. (8 pts)

Question 3:

 

Maturity

Price

Yield

Mid Yld

1M

24 Nov ’20

0.0750 / 0.0

6

50

0.0760 / 0.0659

0.0750%

2M

22 Dec ’20

0.0900 / 0.0800

0.0913 / 0.0811

0.0862%

3M

28 Jan ’21

0.0975 / 0.0875

0.0991 / 0.0890

0.0975%

6M

29 Apr ’21

0.1100 / 0.1000

0.1116 / 0.1014

0.1100%

1Y

07 Oct ’21

0.1225 / 0.1125

0.1243 / 0.1142

0.1225%

0. Compute the price at which you could sell the 6-month Treasury bill shown in the above table. (8 pts)

0. Compute the bond equivalent yield on the 6-month Treasury Bill shown in the above table. (8 pts)

Question 4:

a. The Day 1 price weighted index is $60. Assuming that Stock C has a 3 for 1 stock split and the price of Stock A increases by 5 percent, compute the Day 2 price weighted index. (9 pts)

b. List and briefly discuss 2 important attributes of an index that will be used to benchmark investment portfolios. (6 pts)

Question 5:

a. Using the Fama-French 3-factor model and the data provided in the Excel file included with this exam, compute Shake Shack’s (SHAK) market, SMB and HML beta coefficients and briefly explain the role of each. (14 pts)

b. Briefly discuss the role of alpha (α) in the active management of stock portfolios. Would a portfolio consisting entirely of SHAK have generated positive alpha during the period covered by the regression results? Explain. (8 pts)

Question 6
:

Identify and discuss characteristics of mutual funds.

a. Identify and briefly discuss 4 types of expenses faced by mutual fund investors. (8 pts)

b. Earlier today you placed an order for 200 shares of the Constantia Fund. As of the market close the Fund had $75 million in assets and $21.5 million in liabilities with 3 million shares outstanding. Calculate net asset value (NAV) and determine, not counting brokerage commissions or other fees, how much you ended up paying for your shares? (7 pts)

Question 7:

a. Identify and briefly discuss evidence both for and against the weak-form of the efficient markets hypothesis (EMH). (8 pts)

b. Identify and briefly discuss two key issues raised in “Why not 100 percent Equities?” by Clifford Asness. (8 pts)

6

Day 1StockPriceShares

A$5010,000,000

B$705,000,000

C$6012,000,000

Question 5

RF

0.0001

0.0001

0.0001

0.0001

0.0001

0.0001

0.0001

0.0001

0.0048

0.0001

0.0001

0.0328

0.0165 0.0083 0.0001

0.0015 0.0001

-0.0018 0.0001

0.0134

0.0031

0.0001

0.0002

0.0002

0.0002

0.0056

0.0105

0.0002

0.0002

-0.0106

0.0002

0.0031 0.0108

0.0002

0.0002

0.0008 -0.0045 0.0034 0.0002

0.0063

0.0002

-0.0040 0.0055 0.0006

0.0002

-0.0055

0.0002

0.0009

0.0002

0.0002

0.0002

-0.0106

0.0056

0.0002

0.0006

0.0002

-0.0077 0.0027

0.0002

0.0002

0.0039 0.0088

0.0002

0.0002

0.0163 0.0129 0.0012

0.0002

0.0003

0.0002

-0.0077

0.0002

0.0025

0.0002

0.0019

0.0002

-0.0106

0.0002

0.0021 0.0111 0.0003 0.0002

-0.0019

0.0002

0.0161

0.0002

0.0002

0.0002

0.0079 0.0047 0.0002

0.0002 -0.0018 0.0002

0.0254

0.0003

0.0040 0.0111 0.0003

0.0081 0.0084

0.0003

0.0076

-0.0109 0.0003

-0.0050

0.0003

0.0100 0.0006 0.0003

0.0003

-0.0037 0.0048 0.0011 -0.0059 0.0003

0.0438

0.0105

0.0003

0.0034

0.0003

0.0082

0.0003

0.0166 -0.0019 0.0003

0.0056 0.0068 0.0004

0.0067 0.0205 0.0099

0.0004

0.0073 0.0008

0.0004

-0.0029 -0.0055

0.0004

-0.0016 0.0104

0.0004

0.0039

0.0004

-0.0037

0.0004

-0.0019 0.0022

-0.0040 0.0004

0.0061

-0.0123 0.0003

0.0044 -0.0019 0.0003

0.0023 0.0021 0.0089

0.0003

-0.0085

0.0015 0.0003

0.0001 0.0003

0.0165 0.0174

0.0004

0.0012 0.0139

-0.0121 0.0004

0.0014 0.0005 0.0047 0.0004

0.0017

0.0145 0.0004

0.0065

0.0004

0.0005 0.0090

0.0004

0.0046

0.0011 0.0004

0.0048 0.0106

-0.0097 0.0004

0.0004

-0.0114

0.0029 0.0004

-0.0121

-0.0071 0.0004

0.0173 0.0054

0.0179 0.0004

0.0004

-0.0290

0.0005

0.0005

0.0005

0.0036

0.0005

0.0004

0.0175

0.0121 0.0004

0.0021 0.0031 0.0004

0.0085 0.0004

-0.0183

0.0004

-0.0046 0.0005

0.0005

-0.0163

0.0005

0.0110

0.0005

0.0135 0.0125 0.0005

-0.0142 0.0005

-0.0276

-0.0074

0.0005

-0.0231 -0.0028 0.0010 -0.0028 0.0005

0.0157 -0.0027

0.0005

0.0008 0.0029 -0.0137 0.0005

0.0157

0.0005

-0.0025 0.0064 0.0095 -0.0071 0.0005

0.0050 -0.0033

0.0005

-0.0036

-0.0018 0.0005

0.0205

-0.0091

0.0005

0.0189

0.0005

0.0127

0.0005

0.0166 0.0214 0.0051 0.0113 0.0005

0.0088 0.0055

0.0111 0.0005

0.0124 0.0031

0.0005

0.0027 0.0076 0.0003 0.0005

0.0032

-0.0010 -0.0002 0.0005

-0.0102 -0.0152 -0.0047 0.0005

-0.0102

-0.0012 0.0005

0.0370

-0.0043

0.0005

-0.0123 -0.0080 0.0005

0.0046

-0.0008 0.0005

-0.0043 0.0221 0.0011

0.0005

0.0140 0.0164 0.0005

0.0156

-0.0040 0.0005

-0.0137 -0.0041 0.0005

-0.0037

0.0005

-0.0004 0.0175

0.0073 0.0005

0.0156

0.0032 -0.0098 0.0004

-0.0068

0.0004

0.0025 -0.0128 0.0004

0.0078

-0.0077 -0.0024 0.0004

0.0134

-0.0052 0.0032 0.0004

0.0161

0.0128 0.0004

0.0004

0.0434 -0.0064 -0.0051 -0.0103 0.0004

0.0004

-0.0090 -0.0040

0.0004

0.0069 -0.0044 0.0023 0.0004

0.0130 0.0047 0.0075 0.0054 0.0004

0.0138 0.0033 0.0070 0.0004

0.0003

0.0230 0.0003

0.0097 0.0078 -0.0067

0.0003

-0.0019 -0.0005

0.0003

0.0113

-0.0160 0.0003

0.0010 0.0048 0.0074 0.0004

0.0056 0.0074 0.0017 0.0075 0.0004

0.0035 0.0000 0.0004

-0.0159 0.0049 -0.0048 -0.0042 0.0004

	SHAK	Mkt-	RF	SMB	HML
2017-01-13 00:00:00	-0.0317		0.0009	0.0045				–	0.0106																0.0001
2017-01-20 00:00:00	–	0.0189	–				0.0031		-0.0114				-0.0018
2017-01-27 00:00:00		0.0083	0.0116				0.0021					0.0056
2017-02-03 00:00:00		0.0100			0.0015		0.0040		–	0.0064
2017-02-10 00:00:00	0.0331			0.0088	0.0013			-0.0123
2017-02-17 00:00:00			0.0175	0.0152		–		0.0055	–		0.0039
2017-02-24 00:00:00	-0.0347					0.0048	–	0.0108		-0.0045
2017-03-03 00:00:00	-0.0821		0.0065	-0.0093	-0.0009
2017-03-10 00:00:00	-0.0470		-0.0055	–		0.0113	–	0.0163
2017-03-17 00:00:00		0.0328	0.0185	–		0.0027
2017-03-24 00:00:00	–		0.0034	–		0.0165	–	0.0089		-0.0183
2017-03-31 00:00:00			0.0105
2017-04-07 00:00:00	–	0.0254	–	0.0044	–		0.0134
2017-04-21 00:00:00		0.0173				0.0111	0.0182
2017-04-28 00:00:00		0.0164		–	0.0097
2017-05-05 00:00:00	0.0657	0.0053				-0.0077		–			0.0047																																				0.0002
2017-05-12 00:00:00		–	0.0019	–			0.0032		–		0.0025	–	0.0125
2017-05-19 00:00:00	0.0471					-0.0040	–	0.0079		–		0.0046
2017-05-26 00:00:00	–	0.0063	0.0146		–		0.0029	-0.0086
2017-06-02 00:00:00	0.0109	–		0.0166
2017-06-09 00:00:00	0.0392		-0.0024	0.0060	0.0335
2017-06-16 00:00:00	-0.0344	–			0.0008			-0.0071
2017-06-23 00:00:00	-0.0237	-0.0385
2017-06-30 00:00:00	-0.0573	–	0.0049																																												0.0004	0.0343
2017-07-07 00:00:00	–			0.0006
2017-07-14 00:00:00	0.0136		–		0.0012	–	0.0129
2017-07-21 00:00:00	-0.0047
2017-07-28 00:00:00	-0.0315	–																									0.0003		0.0069
2017-08-04 00:00:00	-0.0736	–	0.0179		0.0084
2017-08-11 00:00:00	0.0313		-0.0152	–	0.0099		-0.0109
2017-08-18 00:00:00	-0.0328		–	0.0067	–		0.0073		–	0.0036
2017-08-25 00:00:00		0.0082		0.0070
2017-09-01 00:00:00			0.0161	0.0143	-0.0144
2017-09-08 00:00:00	–		0.0023	–	0.0139
2017-09-15 00:00:00	0.0379	0.0170		0.0068	0.0178
2017-09-22 00:00:00	0.0377	0.0158
2017-09-29 00:00:00	-0.0012	0.0091	0.0215	0.0059
2017-10-06 00:00:00					-0.0019
2017-10-13 00:00:00		-0.0068	-0.0067	-0.0025
2017-10-20 00:00:00	0.0349		0.0090			0.0076
2017-10-27 00:00:00	0.0389		-0.0059		-0.0008
2017-11-03 00:00:00	0.0255	–	0.0124	-0.0034
2017-11-10 00:00:00		0.0370		-0.0041	–	0.0095
2017-11-17 00:00:00	-0.0266
2017-11-24 00:00:00		0.0104		0.0110		–	0.0085
2017-12-01 00:00:00	0.0947		-0.0091		0.0221
2017-12-08 00:00:00	0.1351	0.0030	-0.0143			0.0017
2017-12-15 00:00:00	-0.0149		0.0081		-0.0027	-0.0069
2017-12-22 00:00:00	-0.0180			0.0054
2017-12-29 00:00:00	-0.0355				-0.0037
2018-01-05 00:00:00	0.0225	-0.0064	-0.0046
2018-01-12 00:00:00		-0.0231	0.0181
2018-01-19 00:00:00	-0.0063		–	0.0050
2018-01-26 00:00:00			0.0205	–	0.0145
2018-02-02 00:00:00	–	0.0438	-0.0381	–	0.0014
2018-02-09 00:00:00	-0.0556	-0.0509
2018-02-16 00:00:00	-0.0392	0.0451				0.0011	–	0.0061
2018-02-23 00:00:00
2018-03-02 00:00:00	–	0.0174		-0.0090
2018-03-09 00:00:00	0.0703	0.0360		-0.0016
2018-03-16 00:00:00	-0.0309			–	0.0121		–		0.0010
2018-03-23 00:00:00	-0.0202	-0.0582
2018-04-06 00:00:00	0.0365	–	0.0138
2018-04-13 00:00:00			-0.0102
2018-04-20 00:00:00		-0.0002		0.0051
2018-04-27 00:00:00	0.0882	0.0042
2018-05-04 00:00:00	0.1839		–	0.0128
2018-05-11 00:00:00	0.0488	0.0243			-0.0028
2018-05-18 00:00:00	–	0.0022	0.0252	–																																							0.0005
2018-05-25 00:00:00	-0.0036
2018-06-01 00:00:00	0.0310		0.0127
2018-06-08 00:00:00	0.0834	0.0168
2018-06-15 00:00:00	-0.0223
2018-06-22 00:00:00	0.0539		0.0140
2018-06-29 00:00:00	-0.0388		-0.0160	-0.0131
2018-07-06 00:00:00		-0.0290	-0.0105
2018-07-13 00:00:00		-0.0163
2018-07-20 00:00:00	0.0564
2018-07-27 00:00:00	-0.0522		-0.0276
2018-08-03 00:00:00	-0.1254	-0.0010	0.0026
2018-08-10 00:00:00	0.0043		-0.0080
2018-08-17 00:00:00	0.0299			-0.0043
2018-08-24 00:00:00	0.0132
2018-08-31 00:00:00	0.0325	0.0096		-0.0005	-0.0187
2018-09-07 00:00:00	-0.0422	-0.0082
2018-09-14 00:00:00	0.0120		-0.0048
2018-09-21 00:00:00	-0.0118
2018-09-28 00:00:00	0.0828		-0.0052	0.0007	-0.0265
2018-10-05 00:00:00		-0.0142	-0.0316	0.0336
2018-10-12 00:00:00	-0.0665	-0.0426	-0.0076	-0.0003
2018-10-19 00:00:00	-0.0436	-0.0015		-0.0098	0.0057
2018-10-26 00:00:00	–	0.0434	-0.0406	-0.0115
2018-11-02 00:00:00	-0.0968	0.0287	0.0155	0.0062
2018-11-09 00:00:00	0.0795	-0.0259
2018-11-16 00:00:00	–		0.0075	-0.0165
2018-11-23 00:00:00			0.0156	-0.0374	0.0117
2018-11-30 00:00:00	0.0818	0.0478	-0.0177
2018-12-07 00:00:00	-0.1372	-0.0483		–		0.0074
2018-12-14 00:00:00	-0.0453	-0.0145	–	0.0135	–		0.0157
2018-12-21 00:00:00	-0.0717	-0.0732	0.0210
2018-12-28 00:00:00	0.0242	0.0314			-0.0137
2019-01-04 00:00:00	0.0637		0.0214
2019-01-11 00:00:00	0.0975	0.0295	0.0209
2019-01-18 00:00:00	0.0280			0.0078
2019-01-25 00:00:00
2019-02-01 00:00:00		–	0.0033	-0.0094
2019-02-08 00:00:00	0.0572
2019-02-15 00:00:00	0.0429	0.0273		-0.0004
2019-02-22 00:00:00
2019-03-01 00:00:00	-0.0079	-0.0141
2019-03-08 00:00:00	-0.0255	-0.0197
2019-03-15 00:00:00	0.0283	-0.0057
2019-03-22 00:00:00	-0.0111	-0.0155	-0.0253
2019-03-29 00:00:00	0.0881	0.0107	-0.0030
2019-04-05 00:00:00
2019-04-12 00:00:00	-0.0083
2019-04-26 00:00:00	0.0359		-0.0159
2019-05-03 00:00:00	-0.0286
2019-05-10 00:00:00	-0.0222
2019-05-17 00:00:00		-0.0103
2019-05-24 00:00:00	–	0.0130		-0.0051
2019-05-31 00:00:00	-0.0271	-0.0112
2019-06-07 00:00:00	0.0380	0.0427
2019-06-14 00:00:00	0.0528		0.0000
2019-06-21 00:00:00	-0.0182
2019-06-28 00:00:00	0.0816	-0.0011
2019-07-05 00:00:00	0.0190	-0.0125
2019-07-12 00:00:00	0.0260	0.0072
2019-07-19 00:00:00	-0.0174	-0.0122	-0.0065
2019-07-26 00:00:00	-0.0022
2019-08-02 00:00:00	-0.0345
2019-08-09 00:00:00	0.1784	-0.0061	-0.0207
2019-08-16 00:00:00	0.0942	-0.0117
2019-08-23 00:00:00	-0.0157
2019-08-30 00:00:00	0.0270
2019-09-06 00:00:00	0.0399	-0.0116
2019-09-13 00:00:00	-0.0308	0.0133	0.0288	0.0500
2019-09-20 00:00:00
2019-09-27 00:00:00	-0.0840	-0.0136	-0.0184	0.0198
2019-10-04 00:00:00		-0.0044	-0.0250
2019-10-11 00:00:00	-0.0321
2019-10-18 00:00:00
2019-10-25 00:00:00	-0.0872
2019-11-01 00:00:00	–	0.0230	0.0147		0.0035	-0.0056
2019-11-08 00:00:00	-0.2502	0.0101		-0.0042
2019-11-15 00:00:00	-0.0179
2019-11-22 00:00:00	-0.0469	-0.0158
2019-11-29 00:00:00	0.0378	0.0154
2019-12-06 00:00:00	-0.0536
2019-12-13 00:00:00
2019-12-20 00:00:00	0.0425	0.0171
2019-12-27 00:00:00