(a)Estimate an appropriate CAPM model describing the return of the mutual funds as a function of some or all factors above: CRSP index, 1-month T-Bill,ExRm, SMB, HML, MoM andTradedLIQ. Carry out and report the necessary statistical tests to justify the choice of your specification. Discuss any found issues with respect to omitted variable bias.
(b)Compare the performances of the two funds and the exposure of the portfolios to different risk factors by comparing relevant coefficients (such as the intercept and slopes) of the models through appropriate tests. The following references will be useful when you interpret and compare the coefficients. Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3-56.