Construct Fama and French Three and Five Factor Model | Part1

In this video we discuss how to construct Fama and french 3 factor model and the five factor model. We also discuss the difference between univariate portfolio sort and bivariate portfolio sort. Bivariate portfolios are divided into bivariate independent sort and bivariate dependent sort. We also look into different breakpoints or cutpoints used to divide stocks into portfolios. Then we discuss value weighted and equal-weighted portfolio return. Lastly we discuss how to form Fama and french three factors i.e. SMB and HML. The size factor is constructed using market capitalizaiton, whereas the value factor is constructed using book to market ratio. In next video we will discuss how to construct fama and french factors in Stata, R and python. Download Stata code to construct FF 3 and 5 factor model https://payhip.com/b/isHhD Download PowerPoint presentation used in this video https://payhip.com/b/N3atE 00:00 CAPM VS FF Model 2:44 Univariate Portfolio 11:38 Bivariate Independent Sort 18:24 Bivariate Dependent Sort 20:58 Portfolio Cutoff/Break point 26:11 Value weighted VS Equal weighted portfolio 27:38 SMB and HML construction Website: thedatahall.com As an Amazon Associate, I earn from qualifying purchases.