Linear regression model
In this exercise you're going to use the Fama French model to explain the returns in your portfolio. You'll first walk through the linear regression model taking all the different steps, and obtain the summary at the end to interpret the results.
In this exercise you'll use statsmodels. You might have come across the linear regression model in scikit-learn. If you are curious how the two options compare, you can read more in this blogpost.
Available is a dataset called factor_returns which contains portfolio returns as well as the Fama French factors. Good luck!
This exercise is part of the course
Introduction to Portfolio Analysis in Python
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Define the model
model = sm.____(factor_returns['pf_returns'], factor_returns[['Mkt-RF','SMB', 'HML']]).____()