Question: How do i solve this? Using the computed loadings through Dec2015 and factor data for Jan-Jun 2016, apply the regression equation to compute out-of-sample predicted

How do i solve this?

  1. Using the computed loadings through Dec2015 and factor data for Jan-Jun 2016, apply the regression equation to compute out-of-sample predicted returns for the 30 stocks for Jan-Jun 2016. Compute alphas for each stock for each month of 2016 by subtracting the predicted from the actual return. Average the alphas.

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