Finance Essay Assignment
Introduction
According to the 2018 Report on US Sustainable, Responsible and Impact Investing Trends, published by the Social Investment Forum (ussif.org), an estimated $12 trillion is invested in socially responsible mutual funds. This is one fifth of all professionally managed assets. Why would an investor choose such a fund? It's likely this investor feels strongly that corporations choosing to act in a socially responsible manner are worth investing in. Alternatively, this investor may choose to omit corporations engaging in particular activities from his or her portfolio. In the end, many investors want to feel good about the activities undertaken by companies they hold in their portfolio. But the question remains, if social screening of the universe of investment choices diminishes alternatives, does a portfolio built around these screens generate returns that are distinctly superior or inferior on a risk-adjusted basis?
This is the central question addressed by Project. If you choose this project,
1) You will need to motivate the relevance of this topic by expanding on the discussion in the introduction above.
2) Search for and discuss prior research in the area of socially responsible investing. (Your Week 4 deliverable is a draft of steps 1 and 2.)
3) Conduct detailed performance analysis for a sample of socially responsible funds.
The required analysis follows the methodologies from Week 3. This includes the calculation of alpha, beta, and other coefficients derived by estimating:
• the 1- factor model (CAPM, or Jensen's alpha), Ri - Rf = αi + βi (RM - Rf)
• the 3-factor model (Fama-French alpha), Ri - Rf = αi + βi (RM - Rf) + siSMB + hiHML
• and the 4-factor model (FF plus Carhart), Ri - Rf = αi + βi (RM - Rf) + siSMB + hiHML + uiUMD
The Excel spreadsheet provided here (Project 2 Model Excel Spreadsheet File.) contains monthly returns for a sample of 56 funds with a social responsibility objective. The sample captures all such funds in existence as of June 2020. In addition to monthly returns, the database contains some descriptive information for each fund.
The spreadsheet also contains macros that will allow you to run regressions for any time period you specify. You can do regression analysis on individual funds and can also create equal weighted and value weighted returns for additional perspective.
You must estimate regressions, three for each of the 56 firms, three for the set of equal weighted average monthly returns for your entire sample and three for the set of value weighted average monthly returns for your entire sample. You will repeat this analysis for two distinct time periods, 2001-2010 and 2011-2020. Yes, this is a lot of regressions, but the macro in the spreadsheet will make this part of the project easy. Your primary job is to analyze the results.
4) Add any additional analysis you think will enhance the insight of the project at this point. The analysis described in step 3 is mandatory and provides a base for evaluation and discussion. This is your opportunity to provide unique quantitative analysis to further address the major research question of the study.
5) Consolidate your results into a section of your report and draw conclusions based on your analysis.
Outline
You should recall this outline from the very beginning of the course:
1) Introduction
What is the project about? Why is this interesting? To whom is this useful? Are there any similar issues or topics in finance? What is the history or background of this topic?
2) Hypothesis
What is the objective of your study? What question(s) does the project address?
For example, if your objective is to demonstrate that there is a direct relationship between employment and GNP, then following the scientific method, the null hypothesis is that there is no relationship between employment and GNP.
3) Related Literature
Are there prior studies related to your project? How do they relate?
The NU library catalog allows you to search for finance journal articles by subject.
4) Data
Describe the data you will employ in considerable detail. These details should include the source of the data (and any other information you employ) and the motivation for any data "editing" you may use. "Editing" refers to the need to eliminate outliers or other observations that are suspect. If you do this, you must do it gently and without bias.
5) Methodology
Explain your research design. Why have you chosen the tests you employ?
6) Results
What are the results of your tests? Is it appropriate to conduct subsequent tests based on your initial results?
7) Conclusion
Do your results support your hypothesis? Why or why not? Is there a bias built into your design? How generalizable are your results? What suggestions can you make regarding further research in this area? What have you learned about your topic based on your analysis?
VIII. References.
Format your assignment according to the following formatting requirements:
(1) The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
(2) The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
(3) Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Download:- Project-Model.rar