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1answer
41 views

Regressing using Fama-French portfolios with small amount of stocks

I'm doing some research for my thesis and I was wondering if it is possible to only use monthly stock price data for 22 stocks and construct Fama-French portfolios out of them and then regress? What ...
2
votes
2answers
55 views

Best practice for international Fama-French analysis

First I have to admit that I have never been really good at thinking about the implications of investments in different currencies. I don't know why but it makes my head spin, this is why I am no FX ...
1
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0answers
16 views

Does the FF 3-Factor model work with unadjusted prices?

I am trying to investigate some trading strategies based on the Fama French 3-factor model, for which I assumed I need to use adjusted prices to account for dividends and splits. However, my ...
4
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2answers
122 views

Fama-Macbeth second step confusion

I am confused on how to run the second step of the Fama Macbeth (1973) two step procedure. I have monthly stock returns and monthly Fama-French factors, for around 10,000 stocks. This creates an ...
4
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1answer
58 views

Fama-French Factors in €

I am having a bit of a problem with currency conversion issues. What I do: I sort European stocks based on their book-to-market ratio, each year I form a portfolio (equal-weight) with the 10 stocks ...
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4answers
184 views

Intuition behind Fama-French factors

In the Fama-French 3-factor model the portfolio returns are explained by the market the SMB factor (Small [market capitalization] Minus Big) and the HML factor (High [book-to-market ratio] Minus ...
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0answers
45 views

UK company data from Datastream: FBRIT+DEAKUK versus WSCOPEUK?

I'm working on a paper investigates the existence of a profitability premium in the UK starting in 1970. (Novy-Marx, 2013) The core methodology is creating Fama and French portfolios, testing the ...
2
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3answers
172 views

French and Fama Three Factor Model - What is the correct formula?

I hope you can help me with the following question. What is the correct way to write the formula for the French and Fama Three Factor Model. I have currently found three versions of this formula, ...
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2answers
84 views

Does it make sense to calculate Fama-French betas of a single stock?

Or should Fama-French only be applied to portfolios?
3
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1answer
144 views

French Data from daily to monthly returns

Ken French on his website publishes daily, monthly and yearly returns for the Fama-French 3 Factors model which are excess market (Rm-Rf), small-minus-big (SMB) and high-minus-low (HML) returns. I ...
4
votes
1answer
99 views

volatility factor

I am trying to add a volatility factor to Fama-French factor model. Does anybody know of a source where I can get data for "volatility mimicking factor" or suggest a simple methodology for ...
4
votes
2answers
103 views

Fama French model-small market beta (weird)

I am analyzing if good governance portfolios outperform bad governance portfolios. After dividing firms with good governance into one pf and bad ones into another for European companies I tried to run ...
2
votes
1answer
60 views

How to deal with missing returns when creating value (equal) weighted returns

recently I am doing cross sectional regressions, and getting confused about missing returns. Suppose we have 100 stocks, then we want to construct a value weighted return (or equal weighted return). ...
6
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2answers
496 views

How to interpret the French-Fama SMB factor?

I regressed ten portfolios on the Fama French factors and get significant loadings on the SMB factor. However, if I look at the actual average market cap of these portfolios, the portfolios with the ...
16
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3answers
2k views

Please give a step-by-step explanation on how to build a factor model

Factor models such as Fama-French or the other ones that are partially summarized here work on the cross-section of asset returns. How are the factors built, how are sensitivities/coefficients ...