III. Analysis question: Suppose that you are going to construct an earnings momentum trading strategy in the following steps. In each quarter, after earnings announcement date, you construct an indicator earnings surprise (ES), which is actual earnings in this quarter minus analyst forecast consensus, scaled by current stock price. Every quarter, you are going to sort firms into ten deciles based on ES, and hold them for one quarter (3 months). The sample period is 10 years. 1. When you regress your monthly high-low portfolio returns on Fama- 2. Suppose you are also going to construct asset growth (AG) anomaly French three factors, how many observations do you have? (5 points) using annual indicator in the same 10 years. When you do the regression to calculate the alpha, will you use the same Fama-French three factors in both AG anomaly and ES anomaly and why? (8 points) 3. Based on Stambaugh and Yu (2012), in your strategy, for the long strategy (long the highest decile) or short strategy (short the lowest decile), which strategy is more profitable when investor sentiment is high and why? (12 points)