[SOLVED] Traded Liquidity Factor
Traded liquidity factorQuestion: (a). Estimate an appropriate CAPM model describing the return of the mutualfunds as a function of some or all factors above: CRSP index, 1-month T-Bill , ExRm ,SMB , HML , MoM and TradedLIQ. Carry out and report the necessary statistical tests tojustify the choice of your specification. Discuss any found issues with respect to omittedvariable bias.(b). Compare the performances of the two funds and the exposure of the portfolios todifferent risk factors by comparing relevant coefficients (such as the intercept and slopes) ofthe models through appropriate tests.The following references will be useful when you interpret and compare the coefficients.Fama, Eugene F.; French, Kenneth R. (1993). “Common Risk Factors in the Returns onStocks and Bonds”. Journal of Financial Economics 33 (1): 356
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