Question
2. Portfolio sorting is one of the most popular way to identify predictability in the cross section of stock returns. a). Briefly discuss the difference
2. Portfolio sorting is one of the most popular way to identify predictability in the cross section of stock returns.
a). Briefly discuss the difference between sequential and independent double (Bi-variate) sorting. What would happen if the two sorting variables are independent with each other?
b). Comparing with the portfolio sorting approach, what are the advantages and disadvantages of the Fama-Macbeth regression approach
Ref:
- Fama, Eugene F and James D MacBeth. 1973. "Risk, return, and equilibrium: Empirical tests." Journal of Political Economy: 607-636. (FM 1973)
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Personal Finance
Authors: Jeff Madura, Hardeep Singh Gill
3rd Canadian Edition
978-0133035575, 133035573, 978-0133970524, 133970523, 978-0134040042
