Hi,
I am trying to run the fama french 5 for 12 companies monthly from July 2010- July 2021. I am currently using the value weighted method (month returns are weighted based on their market cap) but the R2 is very low at 2%. can anyone explain to me why this is?
. reg excess_return dec_rmrf SMB HML RMW CMA
Source | SS df MS Number of obs = 1,440
-------------+---------------------------------- F(5, 1434) = 7.95
Model | .009818182 5 .001963636 Prob > F = 0.0000
Residual | .354133237 1,434 .000246955 R-squared = 0.0270
-------------+---------------------------------- Adj R-squared = 0.0236
Total | .363951419 1,439 .00025292 Root MSE = .01571
------------------------------------------------------------------------------
excess_ret~n | Coefficient Std. err. t P>|t| [95% conf. interval]
-------------+----------------------------------------------------------------
dec_rmrf_2 | .0353966 .0070411 5.03 0.000 .0215846 .0492087
SMB | -.2156131 .0854542 -2.52 0.012 -.3832417 -.0479845
HML | .1805891 .0769011 2.35 0.019 .0297384 .3314397
RMW | -.0230099 .0676428 -0.34 0.734 -.1556992 .1096795
CMA | .053118 .0666609 0.80 0.426 -.0776453 .1838813
_cons | -.0597313 .0004152 -143.85 0.000 -.0605458 -.0589167
------------------------------------------------------------------------------
I am trying to run the fama french 5 for 12 companies monthly from July 2010- July 2021. I am currently using the value weighted method (month returns are weighted based on their market cap) but the R2 is very low at 2%. can anyone explain to me why this is?
. reg excess_return dec_rmrf SMB HML RMW CMA
Source | SS df MS Number of obs = 1,440
-------------+---------------------------------- F(5, 1434) = 7.95
Model | .009818182 5 .001963636 Prob > F = 0.0000
Residual | .354133237 1,434 .000246955 R-squared = 0.0270
-------------+---------------------------------- Adj R-squared = 0.0236
Total | .363951419 1,439 .00025292 Root MSE = .01571
------------------------------------------------------------------------------
excess_ret~n | Coefficient Std. err. t P>|t| [95% conf. interval]
-------------+----------------------------------------------------------------
dec_rmrf_2 | .0353966 .0070411 5.03 0.000 .0215846 .0492087
SMB | -.2156131 .0854542 -2.52 0.012 -.3832417 -.0479845
HML | .1805891 .0769011 2.35 0.019 .0297384 .3314397
RMW | -.0230099 .0676428 -0.34 0.734 -.1556992 .1096795
CMA | .053118 .0666609 0.80 0.426 -.0776453 .1838813
_cons | -.0597313 .0004152 -143.85 0.000 -.0605458 -.0589167
------------------------------------------------------------------------------
Comment