March 24, 2010Abdullah Al-Ashi

Jungha WooMuna Albasman

Talha Yasin

(When rolling periods is (+2) months)

JAN 2003 FEB 2003 MAR 2003 APR 2003 MAY 2003

2

1. IBM2. MSFT

3. GOOG4. DELL

5. JAVA6. YHOO

7. CIT8. PM

9. EXPE10. COST

1. IBM2. GOOG

3. MSFT4. DELL

5. JAVA6. COST

7. PM8. CIT

9. EXPE10. YHOO

Sorting pointsEarning report dates

Gt = -

Applied adjusted price and adjusted volume for Reference price, Capital gain overhang (Gt) computation adjusted price = unadjusted prc/cum

adjusting factor( dsf.cfacpr) adjusted volume = unadjusted vol* cum

vol adj factor ( dsf.cfacshr) Used to compute correct reference price

Fixed incorrect capital gain overhang values Due to incomplete CRSP mutual fund

database, some mutual funds holding reports include 0 as total market value when its number of shares and stock price are both positive.

Corrected: Now, only 2 missing value exist out of millions of observations

Formed portfolio in terms of Gt, CAR using SAS and divided that into quintile.

Computed one month rolling portfolio …

Calculated holding period (1&2-months) returns with adjusted price

Calculated the 1&2-month portfolio excess return, regressed to get monthly alpha for each quintile

Running time was around 190 min for 1-month portfolio excess return calculation and around 120min for the 2-month portfolio excess return

For delisting events, we currently assumed 100% loss incurred Technically, holding period return value can be refined by

calculating delisting returns and investing risk-free assets for the last month of the rolling period

Adopted 100% loss for simplicity Will improve later

Table join is costly

ID CAR Return(Feb-Jan/Jan)

Rf01

Return- Rf

83750 0.0387126743 0.066666600000003 0.1 -0.033333399999997

44813 -0.032715938 -0.095238078231292

0.1 -0.195238078231292

74500 -0.070871368 0.149897338018122 0.1 0.049897338018122

1-month portfolio of JAN2003

2-month portfolio of JAN2003

ID CAR Return(March-Jan/Jan)

Rf01

Return- Rf

83750 0.0387126743 0.266666600000003 0.1 0.166666600000003

44813 -0.032715938 -0.142857081632651 0.1 -0.242857081632651

74500 -0.070871368 0.061601683315653 0.1 -0.038398316684347

ID CAR Return(March-Feb/Feb)

Rf02

Return- Rf

88503 1.2138412562 0.578947388199446 0.09 0.488947388199446

88178 0.8655223567 -1.0 0.09 -1.0900

84314 0.5666373861 0 0.09 -0.0900

1-month portfolio of FEB2003

2-month portfolio of FEB2003

ID CAR Return(Apr-Feb/Feb)

Rf02

Return- Rf

88503 1.2138412562 -0.063157898054294 0.09 -0.15315789805429

88178 0.8655223567 -1.0 0.09 -1.0900

84314 0.5666373861 -2.084905577839090 0.09 -2.17490557783909

Quintiles Classification1-mon portfolio Average excess monthly return Excess

MarketReturn

minDate q1 q2 q3 q4 q5

02-Jan-2003 -0.0333 -0.1952 0.0499 0 0 -2.4400

03-Feb-2003 -0.2119 -0.2562 -0.1880 -0.2125 -0.2102 -1.6300

03-Mar-2003 -0.2102 -0.2149 -0.2116 -0.2146 -0.2104 0.9300

01-Apr-2003 -0.1634 -0.2059 -0.1980 -0.1733 -0.1022 8.1800

2-mon portfolio Average excess monthly return ExcessMarketReturn

minDate q1 q2 q3 q4 q5

02-Jan-2003 0.1667 -0.2429 -0.0384 0 0 -2.4400

03-Feb-2003 -0.1919 -0.2241 -0.1943 -0.1961 -0.1900 -1.6300

03-Mar-2003 -0.0751 -0.1459 -0.1300 -0.1522 -0.0964 0.9300

01-Apr-2003 0.0236 -0.0681 -0.1165 -0.0263 0.1135 8.1800

Regression Time-series averages of excess monthly returns,

in excess of CRSP market index

where R is the portfolio’s return rate, Rf is the

risk-free return rate, and Mkt is the return of the whole stock market.

Rf and Mkt downloaded from Ken French’s online data library,http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html#BookEquity

ff RMktRR

Table V of Disposition Effect Paper

Months q1(good)

q2 q3 q4 q5(bad)

L/S

+1 -0.3899 -0.4667 -0.5781 -0.4591 -0.4064 0.0165

+2 -0.3807 -0.4625 -0.5779 -0.4550 -0.4012 0.0205

First, need to get the first trading day of each month( called mindate)

Secondly, integrate CAR and Gt over all the available data set, and compute Gt at mindates CAR values available at earning report dates Gt values meaningful at mindates.

Calculate the adjusted price difference, return for each stocks in quintile

Calculation of returns and alphas