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AcF 602 Advanced Investment Management
Lent term 2024/2025
Overview
Students enrolled to AcF 602 are compulsory to complete the following coursework assessment as a part of fulfilment. The coursework contributes 20% toward the overall mark for the module. The assignment includes 2 tasks.
Group Allocation
Each group should include no more than three group members. Group registration should be completed via Moodle.
Assignment Deadline
12:00 (noon) on Monday 7 April 2025
Submission Requirement
All groups should submit Python codes and reports before the deadline. You only need to submit the electronic version in Moodle.
Cover Sheet:
You should include your group details on the first page of your report. Following details should be included: Full names and student IDs of group members
Style Requirement
Times New Roman, font size 12, 1.5-spaced. The main text must be consistently formatted (i.e., avoid modifying the font, size and colour). Use page numbers.
Word limit
The word limit is 1000 for Task 1 and 1800 for Task 2.
Coursework Assignment
Task 1 [50 marks] – Factor Modelling
1. Construct the Fama-French five-factor model following Fama and French (2015) and compare your replicated results with constructed factors (i.e., test the correlation) from the French Data Library. The sample period is from July 1963 to December 2023. [20 marks]
2. Each group should select two US domestic equity mutual funds, including one large value and one small growth fund. You should obtain monthly returns for these two funds from January 2010 to December 2023 from CRSP. Then regress the monthly returns of your selected funds (as dependent variable) on Fama-French five factors (as independent variables) and interpret your regression results. Note that you can find fund categories from website such as “US News Money” . [15 marks]
3. Perform Fama-MacBeth regression on Fama-French five factors using the universe of stocks listed on NYSE, AMEX and NASDAQ from 1963 to 2023 and briefly interpret the results. [15 marks]
Task 2 [50 marks] ESG data
1. Choose two firms and obtain relevant data from January 2007 to December 2023 from RepRisk. Discuss and tabulate their RRI index (i.e., current_rri), the total number of incidents, the number of incidents with high reach, the number of incidents with high severity, and the number of incidents with high reach and high severity. [10 marks]
2. Download relevant data for the sample of all US stocks listed on NYSE, AMEX, and NASDAQ from January 2007 to December 2023 from WRDS. At each June, rank those firms based on their book-to-market ratios and divide them into ten decile portfolios; for each decile portfolio and each June, compute the equal-weighted and value-weighted averages of the RepRisk RRI index(i.e., current_rri)) and the number of ESG incidents; then plot the equal-weighted and value-weighted averages for two extreme decile portfolios (i.e., the decile 1 portfolio with the lowest book-to-market ratios, and the decile 10 portfolio with the highest book-to- market ratios). Discuss and interpret your results. [20 marks]
3. Download relevant data for the sample of all US stocks listed on NYSE, AMEX, and NASDAQ from January 2007 to December 2023 from WRDS. At each June, rank those firms based on their cumulative returns in the past three years (i.e., month t-36 to month t-1) and divide them into ten decile portfolios; for each decile portfolio and each June, compute the equal-weighted and value-weighted averages of the RepRisk RRI index(i.e., current_rri)) and the number of ESG incidents; then plot the equal-weighted and value-weighted averages for two extreme decile portfolios(i.e., the decile 1 portfolio with the lowest prior-three-year returns, and the decile 10 portfolio with the highest prior-three-year returns). Discuss and interpret your results. [20 marks]