Fama-Macbeth does a two-step regression i.e a time-series and cross-sectional regression and we estimate betas and lambdas, so how does one predict based on these parameters, which one to choose?
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1$\begingroup$ Please add the formula or at least a reference ... what are the Lambdas? $\endgroup$ – Ric Nov 19 '15 at 7:38
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Those are not predictive models. Fama-MacBeth just checks whether the model is valid unconditionally. Chapter 12 from Cochrane book is a good reference.
answered Nov 19 '15 at 10:13
