# 4 Univariate sorts

**Exercises:**

- Load the monthly CRSP file, the Fama-French Factors and the estimated betas from the
`tidy_finance.sqlite`

database. - Create portfolio sorts based on the
*lagged*beta. More specifically, each month you compute the breakpoint as the median*lag*beta, then you compute the returns of a portfolio that invests only in the stocks that had a higher beta than the breakpoint and a portfolio that invests only in the stocks that had a lower beta than the breakpoints. The portfolio weights can either be equal or value weighted. - What are the monthly excess returns of both portfolios?
- Does a portfolio that goes long high beta stocks and short low beta stocks yields excess return that are significantly different from zero?
- Write a general function for portfolio sorts based on a variable number of breakpoints. Then, compute portfolio returns based on
*lagged*beta decile sorts. - What is the CAPM alpha of the 10 portfolio returns? Is this finding in line with your expectations based on the CAPM implications?
- Does a high beta minus low beta portfolio yield abnormal excess returns?

**Solutions:**
All solutions are provided in the book chapter Univariate portfolio sorts