Publisher Summary This chapter investigates the issues of portfolio formation and asset pricing tests. Work in empirical finance starts with grouping individual stocks into portfolios that are based on a particular attribute of the stocks. This chapter also examines the effect of this practice and whether using individual stocks solves the problem of grouping. Canadian stock return data is used in the chapter. The chapter considers three asset pricing tests: the multivariate F test, the average F test and a robust specification test. Grouping of stocks based on different attributes can give different asset pricing inference using the same pool of stocks. Using individual assets introduces a survivorship problem, and the three asset pricing tests can give different inference on the same model specification. A simulation study is implemented in the chapter to study the robustness of different asset pricing tests to the spurious correlation.