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From the Paper "momentum crashes", Daniel and Moskowitz

From the Paper "momentum crashes", Daniel and Moskowitz

$I_B$ is a dummy Variable which could be either one or zero

Is it possible to regress on two intercepts? or do i get something wrong ? Are there options to create my own linear regression model ?

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What I would do: run the regression twice.

The first time use only the time periods with $I_{t-1} = 0$

The resulting Alpha and Beta will be estimates of $\alpha_0,\beta_0$

Now run the regression a second time, using the other data points, those with $I_{t-1} = 1$. The resulting Alpha and Beta are estimates of $\alpha_0+\alpha_B,\beta_0+\beta_B$. By subtracting the already known $\alpha_0,\beta_0$, you can find $\alpha_B,\beta_B$.

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  • $\begingroup$ Thank you very much! just one thought left: since it is called conditional CAPM, doesn't the compare group (you suggested as first regression: I = 0) hast to be the whole sample, so the unconditional fit (so alpha(0) contains all values, alpha(b) only I=1) $\endgroup$ – KDMS Jun 23 at 12:27
  • $\begingroup$ nvm since checking with the solutions your attempt makes sense thanks! $\endgroup$ – KDMS Jun 23 at 12:31

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