The following are the steps I took. It's pretty much as per W. Berstein's Roll Your Own article, but I don't have Morningstar Principia Pro so used Yahoo Finance.
1. Went to Yahoo Finance and downloaded monthly pricing data into Excel.
2. Calculated the monthly returns based on adjusted close values (adjusted for dividends and splits).
3. Downloaded the monthly Fama/French Benchmark Factors from Ken French's website.
4. Ran regression function in Excel. Data Analysis > Regression > Input Y as fund's return series. Input X as the Rm-Rf, SmB, and HmL series. Checked yes to Labels. Output to New Worksheet Ply.
I looked at Vanguard TSM, DFA Core 2, iShares S&P600 Value (IJS), Bridgeway Ultra Small (BRSIX) and Am. Funds Wash Mutual (AWSHX). I used all of the data available within Yahoo finance for all funds and matched it up against French's data.
Code: Select all
Intercept Rm- Rf SmB HmL
TSM 0.22 1.00 0.00 0.02
Core2 0.08 1.04 0.23 0.09
IJS 0.24 0.86 0.69 0.26
BRSIX 0.44 0.87 0.69 0.16
AWSHX 0.42 0.81 -0.26 0.28
Looks like I've got a lot of stuff going wrong:
1. I would blame the oddities on Yahoo Finance's data, but the three factors for TSM all look correct and the R-squares are all in the high 90's, which is pretty much the only encouraging aspect of my results.
2. The intercepts, which are supposed to represent "alphas", appear all wrong. None are negative, which I would expect.
3. Core2's Rm-Rf and SmB look right, but HmL looks too low. I was expecting 0.2 or so.
4. IJS's HmL looks too low. I was expecting 0.6 or so.
5. BRSIX's SmL looks too low. I was expecting 1.0 or so.
Can anyone help me out? Where did I go wrong?