In the three-factor model of Fama and French (1993), portfolio returns are explained by the factors Small Minus Big (SMB and High Minus Low (HML) which capture returns related to firm capitalization (size) and the book-to-market ratio (B/M). In the standard approach of the model, both the test...

We use the cross-section regression approach of Fama and MacBeth (FM 1973) to construct cross-section factors corresponding to the time-series factors of Fama and French (FF 2015). Time-series models that use only cross-section factors provide better descriptions of average returns than...

This paper provides an overview of the recent literature on estimation and inference in large panel data models with cross-sectional dependence. It reviews panel data models with strictly exogenous regressors as well as dynamic models with weakly exogenous regressors. The paper begins with a...