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Questions tagged [fama-french]

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1answer
72 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 ...
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33 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 ...
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1answer
53 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 ...
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2answers
142 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 ...
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1answer
87 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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47 views

How to incorporate Fama and French three-factor returns in cross-sectional multiple regression model?

I have a follow -up question about the use of Fama and French three-factor model returns as control variable in a cross-sectional multiple regression: How do I control for a firm's “factor ...
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1answer
117 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
28 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 ...
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1answer
53 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 ...
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27 views

What does 'Average Firm Size' in the Fama-French sector return dataset mean?

I was looking at the Fama-French sector returns, and there are data on 'Average Firm Size'. Can anyone point me to what that means? Is it average market cap per firm? Thanks a lot!
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63 views

FF 3 Factor Model - Seeking Advice

I'm an incoming sophomore statistics major who's just getting into actually analyzing real financial data. I attempted to regress FF's 3 factors against a small cap value fund to evaluate its ...
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1answer
78 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). ...
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1answer
71 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 $...
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1answer
333 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 ...
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1answer
79 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}...
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170 views

Fama-MacBeth regression

I would like to estimate the following equation, but I don't know which model using: $R_{i,t}=\alpha_i b_t + \beta Cov(R_{i,t},R^m_t)$ My depend variables (the variables I have) are $b_t$ and $Cov(R_{...
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32 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 ...
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1answer
90 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 ...
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1answer
278 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 ...
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51 views

FF5 model: What Small RMW means

I want to calculate a cumulative return of (small RMW - big RMW) portfolio. However, I cannot understand what "small RMW(or big RMW)" means exactly. Can you guys explain what it means? And Give me ...
2
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1answer
46 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 ...
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80 views

Should Fama French Factors lagged?

I am estimating returns of individual components of the SP500 using a 3-factor FF model. I am using the estimated returns to build a simulated trading strategy updated daily, where I will construct a ...
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1answer
160 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 ...
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61 views

Applying test assets in Fama Macbeth cross-sectional regressions

I have a question regarding the use of test assets in the 2-step Fama Macbeth regression approach. I try to find the determinants of expected returns for a specific industry. In the first (time ...
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461 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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58 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 ...
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2answers
399 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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167 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 ...
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1answer
808 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+...
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1answer
256 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 ...
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2answers
170 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 ...
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17 views

What is the best data range for calculating Risk Premiums for Market, Size and Value?

In French's website where he posts data, his data goes back to 1926. http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html In Fama French's paper "The equity risk premium" they ...
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86 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) ...
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1answer
42 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?
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2answers
381 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 ...
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1answer
221 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
103 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 ...
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61 views

Persistence for alpha (abnormal return) in a time-series of stock returns

I'm trying to fit a model which would estimate the persistence of alpha (abnormal return or the intercept from CAPM/Fama-French 3-factor model). Any suggestions? Datasample consists of stock returns ...
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103 views

Statistical test to analyse the effectiveness of asset pricing models?

Besides simple regression analysis, diagnostic tests to detect heteroscedasticity and autocorrelation. Are there any more statistical tests to examine the efficiency of asset pricing models (CAPM, ...
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1answer
110 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 ...
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1answer
2k 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 ...
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1answer
238 views

Carhart (1997) momentum factor loading

I am evaluating the performance of a sample of 1000 mutual funds over the period 2000 to 2017 using Carhart (1997) four factor model. As a way to test for robustness, I use two benchmarks. The CRSP ...
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0answers
1k views

Calculate the Fama-French Factors in Python

I am starting my journey in Quant Finance, and was hoping someone could help me. Im trying to work out how to build the Fama French Factors using Python myself, rather than use those already ...
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1answer
770 views

fama French regression in Eviews

I'm trying to figure out how to perform CAPM, the fama french 3 Factors and 5 Factors and the Carhart 4 factors regressions in Eviews. I downloaded all the data from French's website. The 3 Factors ...
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1answer
391 views

Fama french model: Daily excess return calculation

I have a decent knowledge of econometrics, but would like to have some help with the procedure of FF regression.Suppose I would like to know if a stock, say AAPL, has outperformed the Fama French 3 ...
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1answer
375 views

How do I control for a firm's “factor loadings” based on the Fama French model in a regression model?

I asked this question before, but in the wrong community (sorry): I want to explain stock returns in a regression model. Besides regressing against my main explanatory variables, I want to control ...
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75 views

Fama-French Global Factor Universe

I'm trying to replicate the Fama-French Global 3 Factor portfolios, but don't know how they define their universe. There are some details on his website, but they only cover ranking methodology and ...
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1answer
373 views

Fama/French momentum replication: risk-free rate missing on one of the legs?

I am using a python script to replicate the monthly UMD factor, disregarding small caps (ie, focusing only on the "BIG HiPRIOR" and "BIG LoPRIOR" sub-portfolios in prof. French's website). For that ...
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1answer
462 views

Obtaining the Data and Calculating the actual Fama-French Factors for top NDXT companies

I am very new to the world of finance (a statistician) and I would like to run time series regressions for 3 and 5-factor Fama-French model in R but before I do that, I am very puzzled about obtaining ...
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189 views

Regressing non-USD returns on FF 3-factor returns

I am analysing some portfolio returns from the perspective of a Danish investor, i.e. in the local currency, DKK. I want to regress portfolio returns in DKK on the returns of a 3 factor Fama & ...