Open AmritSd opened 1 year ago
Because the stocks in our portfolio are volatile. When we regress them against the fama-french factors, we may underestimate them. Thus we regress them against the current factors and their lagged versions.
The regression formula is: R_s - rf = beta_1 SMB + beta_2 HML + beta_3 MKT-rf + beta_4 SMB(t-1) + beta_5 HML(t-1) + beta_6 MKT-rf(t-1)
Check the file: data_cleaning/lagged_three_factor.ipynb
Input:
Output:
Create a df of lagged fama-french factors