The aim of this project is to assess your ability to estimate and apply the FF three-factor model in a real-world setting.
finance
Description
1. The aim of this project is to assess your ability to estimate and apply the FF three-factor model in a real-world setting.
2. Refer to the attached Excel spreadsheet to find your allocated firms for this project.
3. For the sample period between Jan 2000 and Dec 2019,
(a) Download the firm’s monthly returns from CRSP.
(b) Download the time series of factor premia from WRDS.
4. Static β estimation
(a) Estimate the firm’s loadings on the factors, and present the estimation results.
(b) Perform model diagnostics such as Cook’s distance and residual autocorrelations. Can you substantially improve your estimation?
(c) Discuss the characteristics of the firm based on its estimated loadings. For
example, does a large positive beta on the firm make sense?
