MFIN6002Spreadsheet Modelling in Finance

This is a take-home computer-based exam. There are 5questions in total. Please read the instructionsofeachquestion in this exam paper carefully and finish all the questions in the Excel file.When you answer the questions in Excel, you must include all the calculationstepsin the worksheet.Students can get access to internet, reference books and other teaching materials during the exam.Students must work on the exam independently.Please submit thecompletedExcel file on the course Moodle before 6pm. Late submission will not beaccepted.

Worksheet “NFLX”containsmonthly stocks data of NetflixInc. (NASDAQ: NFLX) listed on NASDAQfromDecember 2012to December 2020. Data are downloaded from Yahoo!Finance.Worksheet “FF4 Factors” contains monthly returnsdata of Fama-French 3 factors (market factor “MktRF”, size factor “SMB”, book-to-market factor “HML”), momentum factor “Mom”, as well as monthlyrisk-free rates “RF”.Data aredownloaded from Kenneth R. French’s website.Momentum factorisdefined as the difference between monthlyaverage return on the high prior returnportfolio andthe monthly average return on the low prior return portfolio. The momentum factor refersto the tendency of winning stocks to continue performing well in the near term.Four-factor modelincluding FF3 factors and momentum factor is widely used in the industry.Use these data to answer Question 1 to 2.Question 1 (15points).Go to Worksheet “Q1”. Use the raw data in Worksheet “NFLX”and“FF4 Factors”to answer thefollowing questions.(1) In columnsC:G(highlighted range), calculate monthly data of fourfactorsand risk-freewhich areready for the multivariate regression(to estimate four-factor model).(2) In column H(highlighted range), constructmonthlylog returnsof NFLX stockfrom January 2013toDecember 2020.(3) In column I (highlighted range), construct monthlylog excess returnsof NFLX stock.(4) Estimate thesample average, standard deviation,and correlation matrix of four pricing factors (MktRF, SMB, HML, Mom). Report the results in highlighted ranges incolumnsL:O.(5)Run the time series regression and estimate four-factor model for NFLXstock. The factor model