Microsoft Word – 7SSMM800 Midterm Coursework new.docx
King’s Business School, King’s College London
Coursework Assignment
Assessment Format: Coursework 2021/2
Module code and title: 7SSMM800 Quantitative Techniques
Coursework Release Date: 10:00 GMT on 26th November 2021
Coursework Deadline Date: 10:00 GMT 6th December 2021
Word count: Students should not exceed more than 2000 words for this
paper. References included.
INSTRUCTIONS TO CANDIDATES:
1. Answer ALL the questions.
2. A template answer sheet has been provided on the KEATS page, you
should complete the cover sheet and then write your answers to the
questions below.
3. Use the Harvard referencing style.
4. If you have a PAA cover sheet, you should include this in addition to
the template answer sheet
5. Save your work regularly, at least every 15 minutes.
ONLINE SUBMISSION INSTRUCTIONS:
1. Your answer sheet should be submitted via the Turnitin submission
link on the module KEATS page.
2. Ensure your document is submitted through Turnitin with the title
CANDIDATE ID – MODULE CODE- e.g. AB12345- 7SSMM800
3. Once submitted please check you are satisfied with the uploaded
document via the submission link.
4. If you experience technical difficulties uploading your assessment to
KEATS please email a copy to .uk with the
subject of the email as CANDIDATE ID- MODULE CODE- COURSEWORK
ASSESSMENT. You should attach supporting evidence of technical
issues where possible.
7SSMM800
Page 2 of 3
Instructions:
Login in on Keats.
Click at the following link and download the file dataset_coursework.dta,
Data have been collected from Yahoo Finance. They range from January 1990
to September 2021 with a daily frequency.
In Column 1, we report the “date”.
In Column 2, the variable “r_market”, is the return of the market portfolio.
In Column 3, the variable “rfr” is the daily return for the Treasury bills, the
risk-free asset.
In Column 4, “hml” is the average return of the stocks in the high market-to-
book portfolio minus the return of the stocks in the low book-to-market
portfolio.
In Column 5, “smb” is the average return of stocks in a portfolio formed by
small market capitalization companies minus the average returns of stocks in
the portfolio formed by big market capitalisation companies (see Figure 1).
Data have been collected from the Kenneth French’s Data Library website and
the full description of the above variables is available at the following link.
From Column 6 onward, you find the price for about 240 stocks listed in the
S&P500.
Figure 1
Choose any one asset.
https://keats.kcl.ac.uk/mod/folder/view.php?id=5804383
https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/Data_Library/f-f_factors.html
7SSMM800
Page 3 of 3
Answer the following questions:
a. Present the Capital Asset Pricing Model (CAPM) and discuss how the model
is made operational going from the theory to the empirical practice.
(10 marks)
b. Estimate the CAPM model. Report and discuss the results and whether you
believe the estimate you have obtained is appropriate. (10 marks)
c. Test the hypothesis that the asset is in equilibrium. Present the testing
procedure, report the result of the test, and discuss the decision you take.
(10 marks)
d. Assume you hold a portfolio. Would you buy the asset under examination if
your aim is to make the portfolio you hold risk neutral? Discuss.
(10 marks)
e. Present and discuss the Fama and French (1993) three factors model.
(10 marks)
f. Estimate the Fama and French (1993) three factors model using the data
and discuss the results. (10 marks)
g. Compare the results for model under question (f) with those from the model
under question (b). What is the preferred model, and why? Discuss.
(20 marks)
h. Discuss the relationship, if any, among the models you have estimated in
point (b) and (f) with the index models. (20 marks)
End of coursework