The results of the estimated Multifactor model for the returns of the TRBCX fund (Large Cap Growth) are given below. What is the SMB? Would you expect the coefficient for SMB to be positive or negative based on fund description? Call: lm(formula = r_trbcx ~ rm + hml + smb + mom) Coefficients: Estimate Std. Error t value Pr(>|t|) (Intercept) 0.002786 0.001384 2.013 0.049027 * rm 0.945856 0.028066 33.701 < 2e-16 *** hml -0.147367 0.037885 -3.890 0.000273 *** smb -0.114167 0.029434 -3.879 0.000283 *** mom -0.083496 0.017658 -4.729 1.61e-05 *** --- Signif. codes: 0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1 Residual standard error: 0.009256 on 55 degrees of freedom Multiple R-squared: 0.9698, Adjusted R-squared: 0.9676 SMB stands for a factor portfolio based on momentum strategy. Due to Efficient Market Hypothesis the coefficient is expected to be zero. SMB stands for a factor portfolio based on size. It is computed as the portfolio returns of small size stocks minus portfolio returns of large cap stocks. Positive coefficient is expected since the TRBCX fund invests in large cap stocks and should have superior performance compared to investment in small cap stocks. SMB stands for a factor portfolio based on size. It is computed as the portfolio returns of small size stocks minus portfolio returns of large cap stocks. Negative coefficient is expected since the TRBCX fund invests in large cap stocks and has a negative exposure to this factor. SMB stands for a factor portfolio based on Book to Market Ratio. It is computed as the portfolio returns of value stocks (high book to market) minus portfolio returns of growth stocks (low book to market). Negative coefficient is expected since the TRBCX fund invests in growth stocks and has a negative exposure to this factor.
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It measures the historic excess returns of small-cap companies over large-cap companies. In the given data, the SMB coefficient is 0.114167. This coefficient represents the fund's exposure to small-cap stocks relative to large-cap stocks. Based on the fund Show more…
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Consider the following table containing yields for mutual funds in different asset classes (small, mid, and large cap). Small Cap Fund Yield (%) Explorer Value 0.86 Small-Cap Value Index Admiral 2.46 Small-Cap Index Admiral Shares 1.49 Strategic Small-Cap Equity 2.83 Explorer 0.17 Small-Cap Growth Index Admiral 0.21 Small-Cap ETF 1.44 Mid Cap Fund Yield (%) Capital Value 0.96 Mid-Cap Value Index Admiral 0.14 Extended Market Index Admiral Shares 1.22 Mid-Cap Index Admiral Shares 1.52 Mid-Cap Growth 2.51 Capital Value 0.32 Large Cap Fund Yield (%) Equity Income 3.24 High Dividend Yield Index 3.50 Diversified Equity 1.23 FTSE Social Index 1.42 Growth Equity 2.36 U.S. Growth 0.37 Capital Opportunity Admiral Shares 1.5 Windsor 1.64 Sum of squares for treatment ≈ 1.5820 Sum of squares for error ≈ 19.1822 Step 1 of 2: What are the degrees of freedom for the sum of squares for error? Step 2 of 2: Find the mean square for error. Round your answer to two decimal places, if necessary.
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The average annual total return for U.S. Diversified Equity mutual funds from 1999 to 2003 was 3.90%. A researcher would like to conduct a hypothesis test to see whether the returns for mid-cap growth funds over the same period are less than the returns for the U.S. Diversified Equity funds. The returns (in %) for a sample of 12 mid-cap growth funds are shown below. 3.5 4.6 2.9 3.3 4.1 3.1 3.7 3.2 3.5 4.5 3.6 4.2 Use the p-value approach to determine if the mean return for all mid-cap growth funds is less than that for the U.S. Diversified Equity funds, at 0.05 significance level. Give the test statistic; p-value estimate, and practical conclusion. Round test statistic to two decimal places. Test statistic = -1.75; p-value < 0.05; There is significant evidence to conclude that the mean return for all mid-cap growth funds is LESS than that for the U.S. Diversified Equity funds. Test statistic = -1.36; p-value > 0.05; There is NO significant evidence to conclude that the mean return for all mid-cap growth funds is LESS than that for the U.S. Diversified Equity funds. Test statistic = -1.36; p-value > 0.05; There is significant evidence to conclude that the mean return for all mid-cap growth funds is GREATER than that for the U.S. Diversified Equity funds. Test statistic = -1.75; p-value > 0.05; There is NO significant evidence to conclude that the mean return for all mid-cap growth funds is LESS than that for the U.S. Diversified Equity funds. Test statistic = -1.83; p-value < 0.05; There is significant evidence to conclude that the mean return for all mid-cap growth funds is LESS than that for the U.S. Diversified Equity funds.
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