Exercise - Single-Stock Factor Pricing

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Exercise - Single-Stock Factor Pricing#

Data#

Use SAMPLING of weekly.

  • ../data/spx_returns_{SAMPLING}.xlsx

  • ../data/factor_pricing_data_{SAMPLING}.xlsx

1.1.#

For each stock, calculate the MKT beta and the sample risk premia (mean excess return).

Create a scatter plot of MKT beta (x-axis) versus risk premia.

1.2.#

Consider the following factor models:

  • CAPM: MKT

  • Fama-French 3F: MKT, SMB, HML

  • 4-Factor: MKT, HML, RMW, UMD

Calculate the factor pricing model using the single-name stocks as the test assets.

For each pricing model, report the the annualized mean of the absolute (value of the) alphas.

1.3.#

For each pricing model, make a scatter plot the

  • x-axis: model risk premia

  • y-axis: sample risk premia

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