Step 2: F statistic = F Value = σ 1 2 / σ 2 2 = 31/20 = 1.55 Step 3: df 1 = n 1 – 1 = 11-1 = 10 df 2 = n 2 – 1 = 21-1 = 20. Null distribution: F ˘F(N;T N K)(normality assumption) GRS (1979):^ 0 2^ u ^ = sr q sr2 f, where sr q is the Sharpe ratio of the (ex post) tangency portfolio … GRS.test(ret.mat, factor.mat) Arguments ret.mat portfolio return matrix, T by N factor.mat matrix of risk factors, T by K . If you desire to use STATA, SAS, or other comparable tools, please consult with the TA. Usage. Hello, Fama French (2015) mentions using the GRS test on their 5x5 portfolios. Step 4: Since it is a two-tailed test, alpha level = 0.10/2 = 0.05.The F value from the F Table with degrees of freedom as 10 and 20 is 2.348. share. For a robust test, using GMM is recommended (see Cochrane's Asset Pricing p230-235). I cannot find the solution any where (in this forum or other places) to how to do this in SAS. In the following statistical model, I regress 'Depend1' on three independent variables. It also has the functions for the power analysis and the choice of the optimal level of significance. W statistic given in (7) of GRS (1989)

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