I am measuring the impact of a particular variable on a sample of stocks. To accomplish this, I am ranking stocks into decile portfolios based on this variable and then estimating the difference in average returns between extreme portfolios.
I would also like to consider the case of a buy and hold strategy. However, I am not sure how to go about estimating the profitability of the portfolios. From what I understand, the idea in this case is to average the returns of the stocks over the holding period after the date the portfolios are ranked, but then there are a few things that are not clear to me:
1.- To calculate the CAPM Alpha of the resulting portfolios, should I make a regression of the average return on the average return of the market in the same period?
2.- What is the difference between purchase and buy and hold strategy portfolios and overlapping portfolios?
3.- Related to the above, is there any reference (book or paper) that provides a practical explanation of the different approaches that are used to build portfolios and carry asset price tests?
Thank you in advance for your help.