Research in Banking and Finance Assignment

Description and purpose

This major assignment requires students to replicate and extend a small piece of research in reproducible form. This develops your critical analysis and problem-solving skills in relation to producing empirical research in finance.

Project requirements

Your task is to answer the following research question:

Does the Fama-French five-factor model outperform their three-factor model?

You have to form a conclusion on this research question based on empirical evidence that you provide through developing relevant hypotheses and testing these using the data posted to iLearn. Data are monthly returns for the Fama-French ?ve factors plus the momentum factor together with the returns for the 25 portfolios double sorted on size and momentum [Size-Prior 2-12]. Data are available in both .Rdata and .csv format.

Refer to Eugene F. Fama and Kenneth R. French, 2015, Dissecting Anomalies with a Five-Factor Model for details of the Five-factor model and how to test these kinds of models. See also the seminar slides for topic 5.

Part A: Group component

Each group is to create a reproducible report that

1. Develops and states your hypothesis statements

2. Describes and implements your tests of these hypotheses

3. Draws appropriate conclusions based on the evidence from your hypothesis testing.

Part B: Individual component

Each group member is to submit a one-page, personal critique of the group report. Your individual critique should

1. Identify what you consider to be the major limitation of your group's analysis

2. Suggest the best way(s) to overcome this limitation.

Assessment -

Assessment will be based on the following characteristics of your work:

1. Appropriateness of the analysis

2. Clarity of reporting results

3. Validity of conclusions

4. Degree to which your analysis extends existing knowledge

5. Presentation and structure of report.

Assignment Files -

https://www.dropbox.com/s/6z9vhonc2j6biqr/Assignment%20Files.rar?dl=0