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Questions tagged [fama-french]

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0
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1answer
32 views

Extend mean-variance optimisation to fama five factor

I'm new to quant finance, and as I'm not a mathematician, I am using python to try an understand it. There are a number of blogs on the internet which explain mean variance optimisation, but no-one ...
1
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0answers
29 views

Using CFNAI index for identifying sample periods

I'm doing my Thesis on Asset pricing models and I would like to find out the effects of business cycles on the performance of asset pricing models for industry portfolios. My initial idea was to ...
2
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1answer
44 views

SMB data for 3-factor and 5-factor are different on French's website

Does anyone know why the SMB data published in the 3-factor and 5-factor data files on French's website are different? Which one should be used then?
3
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0answers
27 views

How to perform Shanken (1992) correction for errors-in-variables issue?

I have two questions pertaining to the Shanken correction: The formula of Shanken correction shown in the Cochrane (2001) Asset Pricing book is as follow: $$\sigma^2(\hat{\lambda}_{OLS})=1/T[(\beta^{...
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0answers
26 views

Statistical procedures on comparing the four Asset pricing models [closed]

I'm a business student and currently writing my thesis on comparing asset pricing models on industry portfolio returns. Being a business student, I lack the knowledge for statistical analysis ; so I ...
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3answers
139 views

Fama-French 5 factor model interpretation of coefficients

I run a regression of the excess return of a company on the 5 Fama-French factors, I obtained the beta coefficients, but I am struggling to understand the meaning of my results. For example, what does ...
4
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0answers
52 views

Are Fama-Macbeth R-Squared (R2) just assymptotically correct?

I have been doing a research on comparing Fama-MacBeth and panel regression procedures. Think of it as an emerging market case for Petersen (2009) link. My research consists of a route based on full-...
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0answers
32 views

Evaluating Fama French 3 factor model Using Fama Macbeth

Hi Can someone please explain me how the cross sectional calculation can be done. For an example, I'm having a vector like this. Vector 1: This is the vector where all the excess returns for n ...
2
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1answer
145 views

Calculating the pricing error in Fama-Macbeth Regression for Fama/French 5 Factor model

I'm very much new to this area and I need to know on how to calculate the pricing error in Fama/French 5-Factor model. The evaluation was done using the Fama-Macbeth approach. I did everything as ...
2
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1answer
105 views

What is the benefit of High-minus-Low as in Fama French model?

Can anyon explain the concept of using High-minus-Low in finance literature.
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0answers
62 views

Stochastic Differential equation: CAPM

Let $R=(R_1, \dots ,R_M)$′ denote a vector of excess returns of M assets observed at $n$ time points, $0<t_1<t_2< \cdots <t_n<T$, within a time span $T>0$. We wish to explain the ...
0
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1answer
52 views

Fama French 3 model factors for German equities

I want to calculate monthly idiosyncratic volatility for the DAX index comprising 30 stocks. I will use the Fama french 3 model. My question is whether I have to calculate these factors for each stock ...
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1answer
58 views

Fama Frech SMB factor and testing for size-effects on the market

I´m currently working on a project where I basically want to compare historically returns between large and small-capitalization stocks in a given time period. I want to approach this problem by ...
2
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1answer
111 views

Transform Fama French Returns to Euro

I constructed a global portfolio and calculate it's daily return in Euro. Now i want to do the regression with the Fama-French daily factor-returns (HML, SMB). However, these returns can only be ...
1
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1answer
129 views

Are Kenneth French Research Returns log-Returns?

Does anyone know if Kenneth French's return data on his website is log returns?
5
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0answers
231 views

Interpreting Fama-French factors for the German stock market

I calculated the Fama-French five factors myself for the German market. Most of my results align well with prior research, except one thing: When i do the calculations for the sub-period from 2011 to ...
1
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1answer
461 views

Fama MacBeth cross-sectional Regression

I am deeply confused right now and hope someone can help me out a bit. I want to replicate part of a paper from Fama/French (2008), Dissecting anomalies, specifically, Table IV "Average Slopes and t-...
0
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1answer
129 views

Creating value weighted portfolio returns. How to handle missing data?

I am creating portfolios using stock data. I have some missing data for certain months. What is the best way to handle this? Should I treat missing months as a return of zero? I want to try and ...
1
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1answer
84 views

How does Kenneth French create the industry portfolio returns?

Kenneth Frenches Data Library includes industry portfolios. Is this done via a software of some type. I have some stock returns but I want to calculcated the returns of the industries in the ...
1
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1answer
155 views

Daily idiosyncratic volatility?

I have a long daily times series of individual stocks and would like to obtain daily idiosyncratic volatility (keeping the same frequency). Apparently, the widely used methodology of Ang 2006 would ...
3
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1answer
124 views

Should factor signals decay?

If the factors have information content, I expected factor portfolios constructed using recent financial statements should outperform portfolios using stale data. To test this, I used the Professor ...
2
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1answer
139 views

Fama French sorting

I am trying to calculate my own monthly fama french factors SMB and HML and I have a general question about a final screening act. I understand that to sort companies in june of year $t$ they need to ...
4
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2answers
302 views

Why is Fama French model a risk model

I get this question from interviewer about what is alpha model, what is risk model and why is Fama-French a risk model. As my understanding, alpha model forecast expected return, so the factor could ...
1
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1answer
109 views

Fama French paper regression questions

I am reading the paper and get the following question. I think here is how the regression is constructed: First step: $R_t^i = \alpha^i + \beta^i \cdot MarketBeta_t + \gamma_i\cdot Size_t + \nu \cdot ...
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1answer
482 views

Calculate Idiosyncratic Risk?

I have basic finance background but I am trying to calculate idiosyncratic risk as measure for firm risk in my CEO gender research. I have found the following on Alpha architect but I am unsure of ...
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0answers
73 views

Tracking when/why datasets are removed from Quandl

While exploring this blogpost on the Tidyquant library for R, I noticed a Fama French dataset on Quandl (dataset: KFRENCH). This no longer (circa July 2018) seems ...
0
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1answer
66 views

Studies utilizing Fama French factors

Are there any studies in reputed academic journals that have used the data library offered by Kenneth R. French regarding the Fama French 3 factor model? I wish to use this data in my master's ...
5
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1answer
121 views

Fama and French 1997 Cost of Equity

Dear Quantitative Finance Members, I was wondering if you can clarify me the following issue. I am trying to estimate the cost of equity following "Industry costs of equity" (Fama and French, 1997). ...
-1
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1answer
150 views

FF 5 factor model Intercept equal 0

In the paper A five-factor asset pricing model from Fama and French (JFE 2015) they say at page 3: "Treating the parameters in (4) as true values rather than estimates, if the factor exposures $...
3
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1answer
432 views

what does “share codes” in Fama and French (2015) exactly mean?

I am new to US stocks and find that US stocks are distinguished by ticker symbols. For example, AAPL is for Apple Inc. hwoever, in CRSP and COMPUSTAT, there are CUSIP, PERMNO and PERMCO to distinguish ...
1
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1answer
105 views

Correct choice of SMB factor for regression models

I am currently conducting a performance analysis, where I use the 3-, 4-, and 5-factor models, hence $R_{it}-R_{Ft}=\alpha+b_{i}RMRF+s_{i}SMB+h_{i}HML$ $R_{it}-R_{Ft}=\alpha+b_{i}RMRF+s_{i}SMB+h_{i}...
0
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0answers
62 views

Geometric or arithmetic mean for excess return of Carhart four-factor model?

In Carhart's article from 1997 "On Persistence in Mutual Fund Performance" he has a table (Table II) showing monthly excess return for RMRF, SMB, HML and WML. I'm just curious if anyone knows if it is ...
2
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1answer
122 views

Are the Fama-French factor portfolios calculated based on absolute or relative value`?

I'm currently trying to replicate a Carhart four-factor model on the European stock market for a project, but I'm unsure how the factor portfolios are formed (replicating it by using the original ...
2
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1answer
554 views

Rsquared in Fama Macbeth using rolling window

I am trying to do Fama Macbeth regression on some tradable factors using 5-year rolling window updated monthly. However, I am a little bit confused when calculating the final R-squared of the model. I ...
3
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1answer
102 views

Returns and Factors for European Market Kenneth French Database

I am planning to estimate Fama-French model for mutual funds with European equity scope. I am thinking about using the European factors from Kenneth French database, which are computed in USD. The ...
5
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1answer
269 views

Fama French (2000): Characteristics, Covariances and Average Returns - intuition behind sorting of the returns

I am in the middle of doing my graduate programme in Accounting and Finance. Right now, I am taking a ph.D level course in Asset Pricing, wherein our first assignment/task is to recreate some tables ...
4
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0answers
830 views

Creating Factor mimicking portfolio returns

I have some trouble understanding how to create factor mimicking portfolio returns. As pointed out in this question, Tsay provides a small description, but I am unsure if my procedure is correct. In ...
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0answers
77 views

Idiosyncratic Volatility

I calculate monthly idiosyncratic volatility as the standard deviation of residuals of a Fama-French regression on daily returns. Now assume that within these daily returns there is a price hike due ...
1
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2answers
791 views

Why do Fama French use NYSE breakpoints in the factors creation

Why do Fama French use NYSE breakpoints in the factors creation and not just aggregate all the stocks on the three exchanges and use that to create the portfolios used to create factors.
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0answers
247 views

Fama French- typical time lag

I have daily prices of 400 stocks for the last 10 years. I have to create each month a portfolio of 20 stocks that minimizes variance with 2 approaches: 1) Estimate volatility with a GARCH(1,1) model ...
2
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1answer
2k views

Interpreting the coefficients of Fama-MacBeth regression

According to Fama & MacBeth (1973) two-step regression, you start with estimating the beta factors. When applying the Fama-French 3-Factor model, you first run the linear regression $$r_{i,t}=α_i+...
0
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1answer
401 views

Calculating fund alpha using Fama-French 3 factor model?

My dissertation requires me to evaluate fund performance, and for that I need to find the alpha for each fund. I have 173 funds total. I have all the inputs for the 3-factor model, and I realise ...
1
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2answers
224 views

How to run Fama-French four-factor model cross-country panel analysis?

I am studying asset-pricing of "aircarft & defence" firms' stocks internationally covering 30 countries over 1980-2016. I can derive SMB, HML, and WML factors from Kenneth French's websites for ...
5
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1answer
96 views

Is the Fama-French website data free of the serious selection bias pre-1962 where it's tilted toward big historically successful firms?

Fama and French use data starting in 1963 in both 1) "Common risk factors in the returns on stocks and bonds" (1993) and 2) "The cross-section of expected stock returns" (1992) and mention in (2) ...
0
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1answer
69 views

Why do Fama French's “Common risk factors in the returns on stocks and bonds” use data starting in 1963? Availability or convenience for results?

What is the reason Fama French's "Common risk factors in the returns on stocks and bonds" use data starting in 1963? Was it availability or convenience for results?
4
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2answers
549 views

Fama and French data: Replicating research

Is there any data out there on the Fama and French (1993) paper? I am not talking about their factor data available on their website, I am interested in reproducing their factor calculations. I am ...
2
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1answer
300 views

How are Fama French Factor Returns for the last 3 and 12 months calculated?

In the Fama/French data library the monthly research factors for the Fama-French-3-Factor-Model and the Fama-French-5-Factor-Model are presented. I don't see how they are calculating the factor ...
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1answer
117 views

Understanding Fama/Frenchs' Five Factors - Returns or Excess Returns?

two short questions: If I download the five factor data from Kenneth French's website (http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html) and for example calculate the average ...
1
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1answer
124 views

Comparison of the four asset pricing models

I am analysing the four commonly used asset pricing models (CAPM, F3F, C4F, F5F) to determine which one is most effective.I have performed time series regressions on the 25 value weighted portfolios ...
2
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1answer
4k views

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 ...