Hi, I am trying to understand the difference between fama french and fama macbeth regressions, and I want to perform the fama french five factor:
1. for fama french I understand that it is a time series so do we just run for each portfolio?
reg excess_return RMRF SMB HML RMW CMA
2. for the fama macbeth I understand that there are 3 steps and I would first perform the time series then the crossectional, is this correct?
a. asreg excess_return RMRF SMB HML RMW CMA
b. asreg excess_return _b_RMRF _b_SMB _b_HML _b_RMW _b_CMA, fmb
3. What is the difference from both procedures and how do we intrepret it? I am currently confused and overwhelmed as I do not understand the difference
Thank you
1. for fama french I understand that it is a time series so do we just run for each portfolio?
reg excess_return RMRF SMB HML RMW CMA
2. for the fama macbeth I understand that there are 3 steps and I would first perform the time series then the crossectional, is this correct?
a. asreg excess_return RMRF SMB HML RMW CMA
b. asreg excess_return _b_RMRF _b_SMB _b_HML _b_RMW _b_CMA, fmb
3. What is the difference from both procedures and how do we intrepret it? I am currently confused and overwhelmed as I do not understand the difference
Thank you
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