10 questions linked to/from Calculating alpha and its meaning
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### CAPM yields very poor fit (low R-squared). Is that normal?

I am playing around with the CAPM for a small European stock market (about 100 stocks). First, I use five years of monthly data (January 2017 to December 2021) to estimate betas for each firm using ...
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### Why estimate the (known) market return in the cross-sectional regression of Fama-MacBeth?

Suppose we are given a dataset with $T$ time periods and $N$ assets or portfolios. We are interested in estimating and testing the CAPM. Using Fama-MacBeth style analysis, we first estimate $N$ time ...
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### Fama Mac-Beth (1973) vs Fixed effect

Currently testing if monthly fund characteristics (size, capital flows, age, risk, persistence,...) explain funds abnormal returns. My data is set as a panel with 1000 equity mutual funds over the ...
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### If CAPM holds, should alpha be zero for all assets?

If CAPM holds, should alpha be zero for all assets?
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### CAPM - Expected vs. actual returns

I'm trying to calculate alpha in excess of CAPM and have seen a few slightly different calculations for CAPM. The primary difference I am seeing is that some equations use expected market returns (e....
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### Is CAPM a cross sectional or time series model?

Given that CAPM is an equilibrium model, it prices the assets in absolute terms. Asset pricing studies use CAPM/ICAPM/CCAPM in a cross-sectional framework i.e. stocks with higher betas will have ...
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### how to interpret the GRS F test values?

I'm comparing the performance of Fama French three factor and Carhart four factor models. For the regression analysis, I have used the 25 Value Weighted portfolios sorted on size and B/M. The Table ...
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### Does the CAPM use the single index model?

When we derive the CAPM (i.e. find equations for the capital market line and the security market line), we nowhere assume that the individual security return is linearly dependent on the marker return ...
1 vote