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