Please put any question or comments on the CF903 project below

Bon-Ju Kyriakos :

Happy New Year~ Just back from holiday and just started to work on the project..(shameful~)

I have three questions about the project:

(1) About SMB and HML, F&F's method seems slightly different from your description of the Beta_S and Beta_V on website. Could I just follow another F&F's paper(1993) which provides clear methodology in the paper?

(2) The fiscal year is different in U.K& U.S. Therefore, may I adjust the time(not at each June) for forming each portfolio, which may slightly more resemble F&F's original idea for timing?

(3) You would like us to replicate F&F(1996)which spent lots of pages to argue LSV's working. However, I remembered you also recommended us to do some thing about "MEAN REVETING(D&T 1985)" & "MOMENTUM(J&T 1993)". Then, could I just deal with the latter ideas instead of arguint LSV's working?

Thank, Marco (Kuan-Chun,Chen)

(1) Yes of course you can.

(2) This is a very good idea.

(3) The original plan is to replicate F+F. Mean reversion and momentum are other ideas that have been put forward. Dealing with these as well will give you extra points.

Kyriakos 11-01-07

Question on Portfolio Type

Q. After a group discussion today a question arose on whether to choose a dynamic portfolio or static porfolio for our period of N years. Which one should we use?

A static portfolio will do fine. Adjusting dynamically is not straightforward with companies switching in and out of size/growth groups.

Kyriakos

Hi Kyriakos :

I had a new quesiton about Divide Groups: F&F used Diff of (Max - Min of MV or BTMV) to set quintiles instead of using equal number of companies for all sub-groups. I would like to follow but find it difficult.

Then, I try to adjust MV and BV/MV: using Log(MV) instead of MV to set break points and this works nicely. Is this adjustment suitable ? Also, if it is, could you recommand me how to adjust BV/MV since my potfolios still have extremely unbalanced nubmer of equities ?

Thanks Marco 21/Jan/07

Marco,

Logs are fine. You could also try and split the companies proportionally, that is 30% are large, 40% medium and 30% small, or something like that.

Kyriakos

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