Conduct a performance analysis for a large U.S. mutual fund and
attempt to relate fund performance to characteristics of the fund.
Mutual Fund Performance Evaluation
On Blackboard, you will nd a spreadsheet containing historical returns as well as other in-
formation on the Fidelity Magellan Fund for the period 1968-2016. To conduct a performance
analysis on this fund, you will also need data on dierent systematic risk factors. Go to Ken
French’s website and download monthly returns for the three Fama-French factors, the risk-free
rate, and the momentum factor over the same sample period and add them to your spreadsheet.
Note that the risk-free rate is included in the same le as the three Fama-French factors.

1. Estimate the Carhart 4-factor model for the Magellan fund by regressing its’ excess returns
on the four factors (note that the fund returns in the spreadsheet are NOT in excess of
the risk-free rate). Use the entire 1968-2016 sample period for this regressions.
What does the regression suggest about the investment strategy of this fund?
Based on the results from the 4-factor model, is this a good fund to invest in?

2. Perform rolling window 4-factor model regressions: In each month t (starting with the
60est month of the sample), estimate the regression using data for months t ? 59 to t.1
Produce two plots:
(a) Plot the time series of rolling-window alpha estimates, along with a rolling window
average of the excess return (not adjusted for risk; also using data for months t?59
to t)
(b) Plot the rolling-window beta estimates for the four factors. Put all four series in one

3. Interpret the development of the coecients with respect to the data provided about the
fund (changes of the manager, expenses,…). Do you see any connection to the facts about
the fund? Comment on the alphas. Hint: This is an open-ended question, i.e. there isn’t
one correct answer. It is sucient to discuss a few things you notice about the relationship
between the fund’s betas and the other information you know about the fund.
1The easiest way to do this in Excel is the ‘=linest()’ function. You can use linest as an array function and
have it return all slope coecients (betas) and the intercept (alpha) simultaneously. For estimating the 4-factor
model, select a 51 block of cells, type =linest() with the appropriate inputs, then press SHIFT-CTRL-ENTER.
Consulting the help page for LINEST may help.

4. In each month t, compute the average excess return on the market using data for months
t?59 to t. Denote this variable by rM;t. Similarly, denote the average excess return on the
Magellan Fund in months t ? 59 to t (computed in part 2a) by rF;t. Regress the variable
‘ ow’ (in column I) in month t on rM;t and rF;t using the available dates ,i.e. 1991-2016.
What does the variable ‘ ow’ measure? Hint: The spreadsheet contains a formula
that computes ow. Looking at this formula is helpful for the interpretation.
Interpret the two estimated slope coecients of your regression. Hint: Keep in mind
that this is a multivariate regression.

Sample Solution

Sample solution

Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell. 

In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.

God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.

Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.

To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.



Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.

Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies4(8), 487.

Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.