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ORIE 4630 — D. Ruppert
Homework #7 — due Friday, Oct 15, 2010
Note:
Students are required to work independently on homework.
1. In this problem you will ﬁt the FamaFrench threefactor model to monthly returns.
The values of the FamaFrench factors were taken from Professor Kenneth French’s
web page and are in a text ﬁle
FamaFrench
mon
69
98.txt
. This text ﬁle has the
following variables:
date
,
Mkt.RF
which is the excess monthly return on the mar
ket,
SMB
which is the smallminuslarge factor,
HML
which is the highminuslow fac
tor, and
RF
which is the riskfree rate. The monthly stock returns are in the data
set
CRSPmon
in
R
’s library
Ecdat
. Run the following
R
code, that ﬁts a regression
model with the three FamaFrench factors as predictor variables. Returns and rates
in
FamaFrench
mon
69
98.txt
are as percentages and returns in
CRSPmon
are as frac
tions, so the latter are converted to percentages. The ﬁrst two years of data are not
used in this analysis.
#
Uses monthly data from Jan69 to Dec98 but then deletes first two years
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This note was uploaded on 09/20/2011 for the course ORIE 4630 at Cornell University (Engineering School).
 '10
 RUPPERT

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