1
$\begingroup$

I have a question about the use of the Fama & French factors.

I’m currently examining possible differences in abnormal earnings between to different type of real estate portfolios. To counter Roll’s (1977) critique on the use of Beta to estimate a portfolio’s degree of outperformance, I will include a few approaches.

Two different portfolio constructions are used:

  1. the value;
  2. and equally weighted

Four different market proxies are used:

  1. CRSP value weighted index,
  2. CRSP / Ziman Equity value weighted index,
  3. a small cap index,
  4. and S&P 500 index.

My first question is:
Is it possible to use the (value weighted) FF factors with momentum to estimate the outperformance of the two different portfolios, since one is equally weighted while the other is value weighted?

Another thing is the four different benchmarks. The first three returns are based on the NYSE, AMEX, and NASDAQ stocks, same as the four factors downloaded from Kenneth K French data library. However this will not be the case for the S&P 500 benchmark.

So, my second question is:
Is it still useful to use these four factors or do I need to manually calculate them with data from the S&P 500 stock?

$\endgroup$

0

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Browse other questions tagged or ask your own question.