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? $\endgroup$– Richi WNov 19, 2015 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, 2015 at 10:13