@pmorel3 wrote:
In Finance, intercepts are called "alphas". "Alpha" is used in investing to describe a strategy's ability to beat the market, or it's "edge." Alpha is thus also often referred to as “excess return” or “abnormal rate of return,” (Source Investopedia).
I understand your point but my research director asked me either to use PROC REG or PROC MODEL.
Thanks for your advice. I will find out what a simulation in the form of a randomization test or a permutation test consists of.
I see your point about interpreting "alpha" or the intercept in this manner. I suppose this depends on the proper model being specified and fitting well. If the model is not properly specified, or doesn't fit well, then the alpha (and its interpretation) is suspect. In addition, there is the multi-collinearity issue which can cause the regression coefficients (including the intercept) to vary wildly depending on what variables are used in the model. So again, I have trouble assigning (in my mind) this interpretation to the intercept.
However, as far as I know, there is no way in PROC REG to statistically compare the intercepts from the two different models on the same data. I can't speak about PROC MODEL as I have never used it.
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