The Fama-Macbeth (1973) rolling-β method is widely used for estimating risk premiums, but its inherent errors-in-variables bias remains an unresolved problem, particularly when using individual assets or macroeconomic factors. We propose a solution with a particular instrumental variable, β calculated from alternate observations. The resulting estimators are unbiased. In simulations, we compare...

In allusion to some contradicting results in existing research, this paper selects China's latest stock data from 2005 2020 for empirical analysis. paper, the redundant factors (HML, CMA) are orthogonalized, and regression analysis of 5*5 portfolio Size-B/M Size-Inv is carried out with these two orthogonalized factors. It found that HML CMA still significant many portfolios, indicating they hav...

This study explores risk–reward patterns in the US stock market and establishes optimal factor-based investing using Fama–French five-factor model through cycles constructed by Shiller’s interest rates Baker–Wurgler’s sentiments. Our emerging evidence confirms that high-interest rate, high-sentiment cycle generates higher excess returns, low-interest low-sentiment lower which supports hypothesi...

As the Covid-19 pandemic sweeping globe in 2020, it had a profound impact on economic circumstances of world. This paper applied Fama-French five-factor model to evaluate influence fun industry America. The industry’s data and daily return from Kenneth R.French’s database were adopted make multiple linear regression. difference coefficients five factors illustrates significant changes entertain...

As COVID-19 has negatively impacted the economy in U.S., this study applies Fama-French five-factor model to examine performance of consumer durable industry before and during outbreak using dataset from Kenneth R. French Data Library. The been divided into two time periods outbreak, February 01, 2019 March 2020 1, 2020, 2021. By multiple linear regression, it is significant that affected great...

The Sharpe (1964), Lintner (1965) and Black (1972) Capital Asset Pricing Model (CAPM) is considered one of the foundational contributions to the practice of finance. The model postulates that the equilibrium rates of return on all risky assets are a linear function of their covariance with the market portfolio. Recent work by Fama and French (1996, 2006) introduce a Three Factor Model that ques...

Misspecified models, noisy betas, and weak instruments are well-known problems in finance and can lead to poor test performance. In this paper, we introduce a new technique for estimating and testing cross-sectional asset pricing models that addresses these problems. We apply our technique to three popular cross-sectional asset pricing models: CAPM, the Fama-French three-factor model, and the C...

Multifactor asset pricing models evolved at an accelerated pace in the past few years after publication of Fama and French five-factor model. Despite results from developed markets which arguably make sixth momentum factor redundant, authors showed this study that emerging market, e.g. Warsaw Stock Exchange, (persistence returns) is still a major factor. The data covers period 2010-2018 on mont...