Given monthly total return data on individual stocks, US portfolios, and country portfolios, estimate the APT or Intertemporal CAPM (ICAPM)

under two sets of factors (Fama-French 3 factors and 3 macro factors) and using the standard Fama-MacBeth methodology. Then use the APT or ICAPM estimates from Jan 2003 – Dec 2012 data to forecast each asset’s expected return in the next month (Jan 2013), or equivalently, each asset’s cost of equity capital.

Finally, determine how much variation of individual stocks, US portfolios, or country portfolios is explained by the APT or ICAPM.