HW8_sol - in absolute value, the null hypothesis of the FF...

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Purdue University Krannert School of Management MGMT 411: INVESTMENTS Assignment #8 Solution 1. Download the Excel file called “Fama-French model_momentum” from our course site. The file contains the monthly returns of the risk-free rate, the market portfolio, the HML portfolio, the SMB portfolio, the portfolio of losers (stocks that have done badly over the last 6 months), and the portfolio of winners (stocks that have done well over the past six months). a) Test if the Fama-French model holds for the losers. What is the conclusion of your test? Regression Statistics R Square 0.665 Observations 564.000 Coefficien ts Standard Error t Stat alpha -0.011 0.002 - 5.405 beta 1.399 0.048 29.10 1 h 0.214 0.072 2.955 s 0.425 0.066 6.385 The FF model predicts that alpha should be zero. Since the t-stat of alpha is greater than 2
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Unformatted text preview: in absolute value, the null hypothesis of the FF model is rejected. The FF model does not hold for the losers. b) Test if the Fama-French model holds for the winners. What is the conclusion of your test? Regression Statistics R Square 0.767 Observations 564.000 Coefficients Standard Error t Stat alpha 0.007 0.001 5.16 7 beta 1.033 0.031 33.5 91 h-0.293 0.046-6.34 1 s 0.359 0.043 8.44 1 The FF model predicts that alpha should be zero. Since the t-stat of alpha is greater than 2 in absolute value, the null hypothesis of the FF model is rejected. The FF model does not hold for the losers....
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HW8_sol - in absolute value, the null hypothesis of the FF...

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