Babson College Fund Quant Semester Report December 2013
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Transcript of Babson College Fund Quant Semester Report December 2013
2 0 1 3 S E C T O R R E P O R T
1 2 / 1 6 / 2 0 1 3
Quant Team
Lundun McCall-Mazza & Bilal Ranjha
Market Discussion
U.S. federal government shutdown
Interest rates up
Consumer spending also up
Consumer confidence flat
Oil prices down almost 12%
Jobless claims fall, unemployment down
Overall Performance (May 1, 2013
to Dec 06, 2013)
BCF S&P 500 SPY IVV
Return 16.69% 15.61% 15.79% 15.60%
Alpha - 1.08% 0.09% 1.09%
Sector Weightings
Sectors Total
Returns Sector Value
Active Fund Value
Active Sector
Weightings
Total Sector
Weightings
S&P 500 Weightings
Consumer 42.65 % $569,489 $889, 586 17.06% 29.59% 22.58%
Tech 18.33 256, 559 889, 586 4.42 14.64 17.99
Healthcare 19.31 213,279 889, 586 4.54 11.88 13.21
Industrials 18.11 203, 490 889, 586 5.02 11.04 10.83
Materials/Energy 28.68 236, 316 889, 586 5.39 13.01 13.73
Telecom/Utilities -7.73 78, 949 889, 586 1.33 4.47 5.35
Financials 16.31 269, 463 889, 586 2.02 14.92 16.19
Attribution Analysis
Total Attribution Allocation Selection
BCF 12-13 1.13 0.38 0.76
Consumer Staples 0.90 -0.02 0.92
Consumer Discretionary 1.24 0.19 1.05
Healthcare -0.11 -0.16 0.05
Industrials -0.51 0.26 -0.77
Tech -0.19 -0.10 -0.09
Materials 0.30 0.26 0.04
Energy -0.63 0 -0.64
Telecom 0.17 0.17 0
Utilities 0.04 0.03 0.01
Financials -0.08 -0.02 -0.07
Peer Fund Long-term Comparison
Fund Name 1 Yr Return 3 Yr Return 5 Yr Return 7 Yr Return
Babson College Fund 24.1% 15.5% 9.4% 6.7%
Janus Research Fund (JAMRX US)
23.06 14.94 11.83 9.00
Eaton Vance Research Fund (EAERX US)
19.28 14.375 8.83 8.36
MFS Research Fund (MFRFX US)
20.36 16.13 10.17 8.65
T Rowe Price Capital Opportunity (PRCOX US)
19.46 16.04 10.02 7.70
Putnam Research Fund (PNRAX US)
20.77 15.43 10.46 6.47
iShares S&P 500 ETF (IVV Benchmark)
19.28 16.17 9.96 7.50
BCF Rank 1 4 6 6
Peer Fund Short-term Comparison
Fund Name Return 05/01- 3 Mth Return 6 Mth Return YTD Return
Babson College Fund 16.69% 8.58% 13.04% 30.68%
Janus Research Fund (JAMRX US)
19.94 10.48 16.29 31.59
Eaton Vance Research Fund (EAERX US)
17.10 10.15 13.82 30.32
MFS Research Fund (MFRFX US)
16.48 8.52 12.64 29.17
T Rowe Price Capital Opportunity (PRCOX US)
16.13 9.82 13.09 29.94
Putnam Research Fund (PNRAX US)
16.83 9.02 13.51 29.61
iShares S&P 500 ETF (IVV Benchmark)
15.60 9.62 12.42 29.06
BCF Rank 4 6 5 2
Investment Style
Risk Analysis
0
0.5
1
1.5
2
2.5
Market Style Industry Country Currency Non Factor
Total Risk
BCF
Tracking Error 2.08%
Factor Risk 1.14%
Non-factor Risk 1.74%
Factor Risk
Style 2.18%
Industry 0.49%
Market 0.05%
Investment Style
0
0.2
0.4
0.6
0.8
1
1.2
Style (Active)
Value-at-Risk (VaR) Analysis
0 50,000 100,000 150,000 200,000 250,000
Consumer Discretionary
Health Care
Telecom
Consumer Staples
Materials
Industrials
Information Tech
Financials
Funds
Utilities
VaR (in USD)
95% 97.5% 99%
Monte Carlo Simulation $74,009 $92,245 $113,783
Historical 1 year Simulation 72,002 82,789 92,402
Historical 2 year Simulation 75,989 92,880 107,811
Historical 3 year Simulation 81,811 103,812 128,705
Parametric 73,066 87,063 103,338
Quant Stock Coverage
TripAdvisor (TRIP) 42% realized return since May 1
Negative alpha due to early exit of position (S&P still holds stock, which has increased 12.5% since sale)
Made over 95% on stock lifetime
Contributed 51 bps to Port return
Synaptics (SYNA) New purchase, long position
Increase of 20 bps since purchase
Semester Project - Bilal
Inputs: o S&P Sector Indexes
o Weekly Gold prices
1989 to 2013 1989 to 2007 T-Test Result 2008 to 2013 T-Test Result
Industrials 0.0014 0.00001 52% 0.0037 59%
Health Care 0.0001 0.00226 69% 0.0001 74%
Financials 0.0014 0.00411 64% 0.0007 42%
Energy 0.0641 0.07535 90% 0.0647 58%
Tech 0.0011 0.00059 80% 0.0062 69%
Consumer Disc 0.0002 0.00069 34% 0.0001 80%
Consumer Staples 0.0019 0.00835 41% 0.0001 65%
Materials 0.0426 0.02715 30% 0.0571 52%
Telecom 0.0017 0.00008 19% 0.0102 48%
Utilities 0.0000 0.00230 21% 0.0005 47%
Tests: o Regression Analysis
o Student T-tests
Semester Project - Lundun
Four economic events studied: 1. GDP Annualized QoQ Growth Rate
2. U.S. Monthly Unemployment Rate
3. U.S. Monthly Existing Home Sales
4. U.S. Durable Goods New Orders MoM Change
Goal: To see how BCF portfolio reacted (pos./neg.) on days of economic indicator announcements, as compared to the S&P 500 index
Tests used: Simple Response Test
Multiple Regression
Two sample T-tests
Results:
Semester Project – Lundun (continued)
= Positive Surprise
= Negative Surprise
= No Surprise
Simple Response Test
% Surprise Intraday S&P Return Intraday BCF Return Market Response BCF Response
0.1% 1.91% 2.18% 1 1
0.2% -0.07% -0.28% 0 0
-1.2% -0.39% -0.36% 1 1
-0.5% -0.18% -0.21% 1 1
0.7% -0.01% 0.12% 0 1
0.8% -1.32% -1.33% 0 0
6 6 COUNT
GDP Growth Rate
• GDP Growth Rate
• Unemployment Rate
• Existing Home Sales
• Durable Goods
%
Normal Market Response 50.0%
Normal BCF Response 66.7%
Abnormal Market Response 50.0%
Abnormal BCF Response 33.3%
%
Normal Market Response 42.1%
Normal BCF Response 42.1%
Abnormal Market Response 57.9%
Abnormal BCF Response 57.9%
%
Normal Market Response 33.3%
Normal BCF Response 44.4%
Abnormal Market Response 66.7%
Abnormal BCF Response 55.6%
%
Normal Market Response 33.3%
Normal BCF Response 38.9%
Abnormal Market Response 66.7%
Abnormal BCF Response 61.1%
Semester Project – Lundun (continued)
Multiple Regression • Dummy variables used for Positive/Negative/No Surprise • All models showed no predictive capabilities (low R
2s, insignificant p-values)
The regression equation is
S&P Return = - 0.00940 + 0.0148 Pos. Surprise + 0.0114 Neg. Surprise
Predictor Coef SE Coef T P
Constant -0.009400 0.007477 -1.26 0.227
Pos. Surprise 0.014800 0.008633 1.71 0.106
Neg. Surprise 0.011409 0.008128 1.40 0.180
S = 0.0105736 R-Sq = 15.5% R-Sq(adj) = 5.0%
Two-sample T-tests
Best model: Predicting S&P return from Unemployment rate surprise
• T-tests proved that mean returns for S&P 500 and BCF on economic announcement days are statistically indifferent from one another
Tests done: • S&P vs. BCF mean returns
for each announcement type
• S&P vs. BCF on “Positive” vs. “Negative” announcement
• S&P good day vs. bad day • BCF good day vs. bad day
Two-sample T for S&P Return vs BCF Return
N Mean StDev SE Mean
S&P Return 19 0.0019 0.0108 0.0025
BCF Return 19 0.0024 0.0114 0.0026
Difference = mu (S&P Return) - mu (BCF Return)
Estimate for difference: -0.00048
95% CI for difference: (-0.00779, 0.00683)
T-Test of difference = 0 (vs not =): T-Value = -0.13 P-Value = 0.895 DF = 36
Both use Pooled StDev = 0.0111