Abdullah Al-Ashi Jungha Woo Muna Albasman Talha Yasin
The disposition effect implies that stock pri ces under-react to bad news when more c urrent holders are facing a capital loss, an d under-react to good news when more cu rrent holders are facing a capital gain. Leads to return predictability.
Test Data (WRDS) CARCAR, G_t IF CAR > 0 Bad newsGood news Perform trading strategies to test hypothesis PEAD, monthly alphas Overhang Spread and Negative Overhang Spread Monthly Alphas by Overhang Spread Alphas and Factor Loading YesNo
Progress SAS Learning and getting comfortable with the SAS command line interface as web interface not adequate for merging/linking tables and calculations etc. Major data processing done in SAS using different procedures like SQL, SAS Interactive Matrix Language (IML) Computing Cumulative Abnormal Returns (CAR) Get the relevant data and compute the values for some famous stocks Computing Capital Gains Overhand (Gt) Computed using the mutual fund holdings for some subset of stocks/MFs Details follow
A measure of the earning news surprises, calculated around the most recent earnings announcement date where r h is the stock return on day h, with the earnings announcement date being at h= 0, and‾r i,h is the CRSP equally weighted NYSE/AMEX/NASDAQ index.
Extracting the following from WRDS: Earning released dates under COMPUSTAT-Fundam ental Quarterly dataset for every company identifie d by GVKEY Daily return values under CRSP-dsf (daily stock file) for every company identified by PERMNO PERMNO-GVKEY merged link table under CCM data set S&P 500 index daily returns
A means of quantifying the FIFO ‘mental accounti ng’ at anchor points Defined as the percentage deviation of the aggre gate cost basis from the current price.
where Vt,t−n is the number of shares purchased at date t −n that are still held by the original purchaser at date t Pt is the stock price at the end of the month t φ is a normalizing constant
Shows aggregate holdings for a group of mutual f unds of a particular stock(MSFT) over time Volume vector with time t-8t-7t-6t-5t-4t-3t-2t-1t Volume Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
If positive, investor is in gains If negative, investor has unrealized loss Thus, efficient way to guess his mental account Need to know the mutual fund holdings of stocks at particular dates(quarterly data available) We are getting the data from the CRSP mutual fu nd database which is from 2003 onwards.
Next Steps Sanity checks on CAR and Gt Integration of code and calculation of CAR and Gt over all the available data set Implementing the rolling portfolios in SAS Calculation of returns and alphas to test the hypothesis