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.


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