I am required to prepare a portfolio containing 10 companies and analyse their returns over 10 years utilising the Fama-French 3 factor and Carhart 4 factor models. I chose the largest market cap companies from the DJIA in 2022 and obtained the following results for my 10-year sample (2012 - 2021):
From alpha I can see that although the portfolio underperformed due to the negative constant, this is statistically insignificant so CAPM, FF and Carhart are relevant and significant risks are being captured within the models. I can also see that the market risk is statistically significant and the portfolio is sensitive to market changes as it follows market trends.
However I am having a challenging time trying to interpret the SMB, HML and UMD and would appreciate assistance with my interpretations:
Size: the portfolio is moving against the movement of small cap stocks. This shows that the portfolio is exposed to large cap stocks which aligns with how companies were selected.
Value: value stocks are not relevant here. This signals that the portfolio is behaving as a growth stock portfolio (?)
Momentum: momentum is not significant here, but the portfolio seems to go against momentum.
Thanks a lot. I have tried looking for similar queries but have not found detailed information.