Fama French 3 factor Model - regressions
Posted: Tue Aug 09, 2011 3:59 am
Dear all,
I have a question regarding a regression with the 3 factor Fama French model.
I look through acquisitions during 2000 to 2010 and I have around 1700 M&A deals. I have monthly share prices of the companies and want to measure their 3-year post acquisition performance. So from the monthly share prices I calculated the 3-year post acquisition monthly returns as (S2-S1)/S1, where S1 is the share price on the announcement date (for example 3 January) of the acquisition and S2 is the share price as at the end of the month (for example 31 January). The monthly return for the following month is computed as (S2-S1)/S1, where S2 is let's say the stock price for February and S1 is the stock price for January.
I also obtained the 3 factors, the S&P 500 index (the market return) and the risk free rate from the Fama French website and they are also available through Warton database.
Now using multiple regressions, I have to estimate the alphas for each observation using the Fama-French 3 factor model and Eviews. How can I run the regression for 1700 observations? Should I use only the returns for the 3-year post acquisition performance or use returns for the sample period 2000-2010 for every observation? Also every deal occurred at different point in time in the sample period. I don't know how to order the company returns in excel for the 1700 M&A deals.
I will appreciate any comments or tips. Thank you all in advance! :)
I have a question regarding a regression with the 3 factor Fama French model.
I look through acquisitions during 2000 to 2010 and I have around 1700 M&A deals. I have monthly share prices of the companies and want to measure their 3-year post acquisition performance. So from the monthly share prices I calculated the 3-year post acquisition monthly returns as (S2-S1)/S1, where S1 is the share price on the announcement date (for example 3 January) of the acquisition and S2 is the share price as at the end of the month (for example 31 January). The monthly return for the following month is computed as (S2-S1)/S1, where S2 is let's say the stock price for February and S1 is the stock price for January.
I also obtained the 3 factors, the S&P 500 index (the market return) and the risk free rate from the Fama French website and they are also available through Warton database.
Now using multiple regressions, I have to estimate the alphas for each observation using the Fama-French 3 factor model and Eviews. How can I run the regression for 1700 observations? Should I use only the returns for the 3-year post acquisition performance or use returns for the sample period 2000-2010 for every observation? Also every deal occurred at different point in time in the sample period. I don't know how to order the company returns in excel for the 1700 M&A deals.
I will appreciate any comments or tips. Thank you all in advance! :)