Questions tagged [regression]

Techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables.

Filter by
Sorted by
Tagged with
2
votes
0answers
47 views

Constructing a replicating portfolio of a long-only strategy using long-short factors

Lets say I want to estimate a replicating portfolio by doing a linear regression between the returns of a long-only portfolio and several long-short factors like Fama-French 5-factor or Betting ...
0
votes
0answers
25 views

PanelOLS or simple OLS?

It is probably a silly question but please assume the following. I gather hedge funds returns and I want to do a regression against few dependent variables (FF factors, etc.). In essence, I get a ...
0
votes
0answers
19 views

Tradeoffs of using Loess regression to fit random walks

I am curious if anyone has had much experience attempting to predict random walks using Loess regression or a variant of local statistical methods.
2
votes
0answers
161 views

How to set up the dummy variable for OLS event study regression

I've been going back and forth with how I should work to find an event effect. would be so grateful for some clarification. I have daily time series of exchange rates for different countries ( 1 for ...
0
votes
1answer
36 views

How do you build a model with uncertain time range?

Let's say you want to test the hypothesis that given a signal reaches some threshold, some asset will have some return over the next period. Here we have two unknowns. One, the value of your ...
0
votes
0answers
76 views

understanding the linear constraint on a regression performance report

I am trying to understand a regression performance attribution. The problem the code solves is shown below. min 0.5 * x'Hx + f'x st. Ax <= b So I have n ...
0
votes
1answer
33 views

Existing research on fund performance contribution analysis?

Consider the following problem: You would like to understand how a particular Multi Asset Class fund is invested (ascertain the weights attributed to each asset class) You have at your disposal a ...
0
votes
0answers
43 views

Results of Fama french three factors model and Fama MacBeth cross sectional regression

I am doing research work on “Idiosyncratic volatility and stock return”. I have calculated Idiosyncratic volatility with the help of Fama french three factor model. IV is defined as the standard ...
0
votes
1answer
40 views

in-sample vs. out of sample conundrum

Lets say I for work with data from 2000-now in one sample (in-sample), and lets say that my out-of -sample will be from 2000 to 1950. I will then get some type of out-of-sample result. If i then run a ...
4
votes
1answer
303 views

Why use square root of companies market cap in the WLS matrix

When doing a regression based performance attribution I see that people normally use WLS. So that both our independent and dependent variables are multiplied by our WLS matrix, which is a diagonal ...
1
vote
0answers
73 views

Results of Fama MacBeth regression

I have run Fama MacBeth cross section regression of of Excess Return of stocks on Idiosyncratic volatility, the log of market capitalization, book to equity ratio and Beta. I'm getting all significant ...
0
votes
1answer
181 views

“using daily returns over rolling annual periods from the regression”

I stumbled upon the following sentences many times in different papers, all describing an approach for the same experiment: They try to calculate sensitivities (Beta) for different stocks via ...
3
votes
1answer
42 views

Regression based performance attribution with dummy variables

I am following some work to do with a regression based performance attribution. The regression is a cross sectional one. The $y$ vector is the risk free return for say 1,000 companies. The $X$ matrix ...
3
votes
1answer
97 views

Align volume bars for multivariate analysis

Looking at the book "Advances in financial machine learning" the author proposes a way to sample high frequency financial data in several fashions which are not only the standard time bars. I was ...
1
vote
1answer
31 views

Appropriate regression when multiple dependent values for same independent value

I have a data set which looks as following: Y 1 2 1 1.5 1 2.5 2 5 2 3 3 5.2 3 6 3 6.8 4 6 4 7 And the corresponding plot is: What kind ...
2
votes
0answers
66 views

Beta estimates of Regressions on AR(1) Process

I am currently working through the paper The Myth of Long-Horizon Predictability [1] and I got stuck in reproducing the empirical results in Section 1.4. It is my understanding that time series of ...
0
votes
0answers
29 views

Python Panel Data Regression for OUP Calibration

I have a model for predicting stock returns that classifies stocks as overbought or oversold, kind of like an RSI. It follows an OUP and I am curious about my $\mu$, $\sigma$, and $\kappa$ parameters, ...
1
vote
0answers
17 views

CS-Regression Three Factor Model

1# When would the three risk factors market, size and value be priced in the FF Three factor model when performing cs-regression? How do you know that they are priced? 2# How would it be possible to ...
1
vote
1answer
44 views

What value to put in lm() function when testing for cointegration (R)

I'm a CS student working on a financial computing project + have a question regarding cointegration testing using linear regression with the lm() function. https://www.rdocumentation.org/packages/...
0
votes
0answers
39 views

Performance attribution and monthly rebalance: Is a month enough data to calculate Beta and Alpha?

A portfolio is built systematically by calculating scores and rebalanced each month to invest only in the 80 best scores. Scores change frequently and therefore the portfolio changes each month, ...
0
votes
1answer
167 views

Extrapolate Implied Volatility Surface

I have a moneynessratio-tenor volatility surface and want to extrapolate the implied volatility for moneynessratios > 150%. The volatility surface was downloaded for different points in time, so I ...
1
vote
1answer
63 views

How to use multi-periods and mult-factors to predict stock price by linear regression?

Give data in $t_n$ denoted by $[x_1^n, x_2^n, ... x_d^n]$ and label $y_n$ to be predicted. We can just train a $d$-dimensional linear regression $y_n=\sum b_ix_i^n$ to make a prediction. However, I ...
2
votes
1answer
269 views

Weighting stocks by market capitalization in a cross-sectional weighted regression

I am trying to regress stock returns on a series of factor scores to get factor coefficients. I want to weight the regression by the square root of market cap which I'm doing by applying a weighting ...
1
vote
0answers
57 views

Where do some numbers in finance papers which seem to appear out of nowhere come from?

On p. 1671 in the paper Kempf/Manconi/Spalt (2017, RfS), Distracted shareholders and corporate actions it says (I think it is in the context of a log regression): Those effects are economically ...
1
vote
1answer
120 views

Understanding Fama Macbeth Regressions of Returns

I'm trying to understand what the Fama-Macbeth regressions of returns actually mean. The source of confusion is a 2013 Novy-Marx paper, in which he states the following: "The first specification of ...
0
votes
0answers
69 views

How to interpret a value stock with 0 beta to HML portfolio

I am unsure of how to interpret stocks that have a low P/b but have a low beta when regressed onto the HML portfolio. Conversely, I have found stocks that are not cheap but have a high beta to HML ...
1
vote
0answers
94 views

Fama-Macbeth practitioner's step by step guide?

I've been reading the original Fama-Macbeth (1973) paper as well as questions here and elsewhere. I feel like I'm beginning to run in circles and would like to clarify/confirm how FM regression is ...
0
votes
1answer
202 views

Uncovering patterns in price timeseries using linear regression

I have some minute-bar data which my professor suggested I resample to 5 minute bars and then separate it into timeseries per bar period. For example, I get one time series for 12:00, another one for ...
0
votes
1answer
55 views

Recovering index weights via least squares regression on components

As an exercise, I wanted to re-construct the index weights for the Nasdaq-100 (^NDX) via linear regression. For these purposes I got the daily adjusted close of its 103 components from alphavantage.co ...
1
vote
1answer
166 views

What does a regression of squared returns of stock on squared index returns and lags show?

We have a squared stock return at t regressed on 3 variables: squared index return, squared stock return at t-1, and squared index return at t-1. My two questions would be: 1. What does this test ...
1
vote
0answers
46 views

Simulate option prices [closed]

Starting value = 3110.29 K = 3100 Trading days = 20 Need to simulate the price of an option by using these 2 methods. ( For homoscedastic errors ). *This is what I have already set up <...
3
votes
2answers
96 views

Cash flows regression on macroeconomic data

I'm looking into a research project and am struggling to find any existing work on this or whether I'm asking the right question. My question is to test the relationship between macroeconomic ...
1
vote
0answers
41 views

Average of R squared correct/allowed/useful?

I just conducted a Fama-Macbeth analysis to estimate the risk premia of Fama/French. In short, I estimated the betas on a company-individual basis first and then conducted a cross-section regression ...
0
votes
1answer
113 views

Seasonality in Independent Variable in Regression

A non-stationary time series should be not used for regression as it can lead to spurious results. However in case of timeseries without a trend but seasonality, what is the downside of using it in a ...
2
votes
2answers
386 views

Fama/Macbeth Regression - negative estimate for market premium

I just conducted a Fama-Macbeth regression to estimate the risk premia of Mkt-Rf, HML and SMB. As a result, I got a negative risk premium for Mkt-Rf which makes no sense in my opinion. As I couldn't ...
1
vote
1answer
129 views

How do weights of a Mean-Variance optimized portfolio change as the Covariance matrix of the risky assets change?

I am learning a bit more about CAPM, and wanted to know if there was a specific way that weightings of assets in the optimal mean-variance portfolio changed (for constant risk aversion, expected ...
1
vote
0answers
67 views

Why is R^2 negative on random data? [closed]

The introductory book says R^2 is between 0 and 1, but I have two randomly generated sequences and the R^2 is negative. So I read further and now understand the negative value is because R^2 ...
1
vote
1answer
82 views

0.0006 r-squared after trying to test whether the intercepts differ significantly. Did I do it wrong?

I am trying to test if the intercepts of two linear regression (CAPM) differ significantly or not. I have 2 fund's monthly return in the same period and regress them on the same market variable (MKT = ...
1
vote
1answer
109 views

Highly skewed (and positive kurtosis) return distribution as a dependent variable

I have two set of optimized returns over a period of time and called this portfolio 1 and 2 and two benchmark portfolio (a value-weighted and equally-weighted benchmark). I want to see the difference ...
2
votes
1answer
197 views

Portfolio Systematic Risk, Breaking it down into factor % contributions

I have a portfolio (p) of N equities, with let's say weights vector (m) at the start of the calculation period. Each equity has its own set of factors (like corresponding country, industry index, etc.)...
1
vote
0answers
66 views

Why don't these betas match?

I am sure I am missing something simple, but I would expect my portfolio beta when regressed against the market to match my individual component betas multiplied by the portfolio weights. I have ...
2
votes
0answers
19 views

Formulating Deposit Rate Sensitivity to Market Rate Changes

I have historical deposit rate data for a specific bank. I want to determine the sensitivity of deposit rates to market rate changes (I'll be using Fed Funds rate). My question is, what would be an ...
4
votes
3answers
240 views

Definitions of Beta

Definition of Beta It is generally understood that the beta of an asset $i$ is given by coefficient of the linear regression of the asset returns on market ($m$) returns, i.e. $$\beta_i = \frac{\rho\...
2
votes
1answer
104 views

What is the effect of leverage (ability to short stocks) upon the Fama-French regression coefficients?

I have optimised a set of portfolio and subsequently regressed the returns against the fama-french-Carhart factors. I have two portfolio, one in which short sales are allowed (the portfolio can take ...
2
votes
3answers
136 views

Factor selection for predicting fund returns

I have a list of factors (and their returns) as well as a set of mutual fund returns. What are some techniques I could use to select relevant factors for the funds. For example, fixed income factors ...
1
vote
0answers
292 views

R squared of a good Trading strategy

What would you consider a decent R square value of a good trading strategy. I know R squared is not a good metric for judging trading strategies but still at an initial stage how do you decide to ...
1
vote
0answers
42 views

Serial Correlation in Rolling Change Linear Regression Models

1.) Lets say I have two time series GDP, BUSINV from (1948, 2019); Frequency of Data is Quarterly. 2.) Say I want to predict GDP i.e. GDP ~ BUSINV 3.) Since GDP is not stationary (i.e. level) and ...
1
vote
3answers
153 views

Insight on how factor models achieve dimensionality-reduction?

Going through the literature on factor models, I keep seeing the phrase "dimensionality reduction" and how factor models allow for the modelling of assets in high-dimensional cases, and I would ...
1
vote
2answers
230 views

How to handle Holidays in Time-Series Datasets?

Im currently analyzing a Dataset of the German Stock market. While Holidays like Christmas or New Year aren't a problem for Return Calculation or Portfolio Performance, im testing some regressions and ...
2
votes
2answers
442 views

Fama French Three Factor Model: How do I get the risk premia?

I try to calculate the cost of equity with the FF3 model and already estimated the beta factors for the market, size and value risk premia by using regressions and the data provided on the Kenneth ...

1
2
3 4 5
7