Generating normal returns

[Jos Vrolijk]

Dear all,

for a project in my company I am trying to compute the abnormal returns with an event study. I want to use the market model to estimate my normal returns, but aditionally I want to add a time-series factor to this estimation: some time-dependent influencing variables that depend on the asset. How do I include this factor into my normal returns estimation?

[Joro Kolev]

Look up any paper that uses the Fama-French factors as benchmarks.

Basically instead of regressing the returns on the market factor, as you do in the market model, you regress the returns on the market factor and on the other factors you want to include (say HML and SMB and MOM).