Preferred language style: English (U.S.)

Statistical Analysis for Mutual Funds Returns
This summer you take an internship with Russell Investments, a financial firm headquartered in
Seattle. They are considering offering a new type of mutual fund and need benchmarking for
what return they should aim for to be competitive. Stew Ellis, your supervisor in the Mutual
Funds Division, asks you to perform a statistical analysis to examine what determines the five year average return on competing mutual funds of different types in the market. Mr. Ellis does
not really care if the data supports offering the new mutual fund or not, he just wants to know
make sure the board will be well informed before deciding. Mr. Ellis needs to be able to make
accurate statements regarding the results of your analysis.

Data (will upload this later)
Data is provided in the Excel spreadsheet Fund Data for Name, name of the fund,
Type, the type of fund, either DE (Domestic Equity), IT (International Equity), or FI (Fixed
Income), NAV, net asset value, which is the closing price per share on December 31, 2010,
Return, the average annual return for the fund over the past 5 years in percent, ER, expense
ratio, the percentage of assets deducted each fiscal year for fund expenses, and MR, Morningstar
Rank, the risk adjusted rating for each fund; Morningstar ranks go from a low of 1-Star to a high
of 5-Stars.

Memorandum
Write a brief (500 words or less) summary of your findings in standard memorandum format for
Mr. Ellis based on your analysis. Based on prior products offered, Russell Investments has good
sense of how their expense ratio will behave, but it is unknown what the Morningstar Rank will
be on the new product. Mr. Ellis is not interested in the statistical analysis; he just wants to
know about the results and what they say about what explains the average return. You will need
to decide what variables to select for the empirical analyses, and interpret and write up the results
in a form that will make sense to him; he is not a statistician. The memorandum should NOT
contain technical jargon. You should include a clearly labeled and explained table or graph to
highlight relevant points about the data and statistical analysis.

Statistical Analysis (Appendix)
Because of the slow approval process at the SEC, a final decision will likely not take be made for
another 7 months. Because you are only on a summer internship you will be gone by then. The
product managers from Russell Investments will not be able to ask you what and why you did in
the analysis. As such, it is imperative that your statistical analyses be clearly and completely
documented. You must describe each step you take and why. Methods, hypotheses and results
of the analysis should be clearly explained and labeled in the appendix. Stew Ellis would prefer
you write the appendix in Word and importing the Excel printouts into Word to make formatting
easier. Do NOT include the raw data, just explanations, graphs and tables


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