The Disposition effect and under reaction to news. March 24, 2010 Abdullah Al-Ashi Jungha Woo Muna Albasman Talha Yasin. -. Gt =. IBM MSFT. (When rolling periods is (+2) months)
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The Disposition effect and under reaction to news
March 24, 2010
(When rolling periods is (+2) months)
JAN 2003 FEB 2003 MAR 2003 APR 2003 MAY 2003
Earning report dates
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
1-month portfolio of JAN2003
2-month portfolio of JAN2003
1-month portfolio of FEB2003
2-month portfolio of FEB2003
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
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