1 / 11

The Disposition effect and U nderreaction to news

The Disposition effect and U nderreaction to news. Abdullah Al- Ashi Jungha Woo Muna Albasman Talha Yasin. Current work distribution. Under-reaction to disposition effect. Post-Earning announcement drift, Alphas. Overhang Spread, Alphas. Alphas by overhang quintiles .

munin
Download Presentation

The Disposition effect and U nderreaction to news

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Disposition effect and Underreaction to news Abdullah Al-Ashi Jungha Woo MunaAlbasman TalhaYasin

  2. Current work distribution Under-reaction to disposition effect Post-Earning announcement drift, Alphas Overhang Spread, Alphas Alphas by overhang quintiles Alphas and factor loadings

  3. Progress (CAR) • Code refined (CAR): • Code is refined to provide one to one linking within a effective dates • When presenting current date WRDS database shows a null value for linkenddate (date until which the link ID’s where effective) • CAR was calculated for all the companies using SAS • Next step: • Apply CAR to sort rolling portfolios • Output file: • Took 15minutes to run, 15.6MB

  4. Progress (Capital Gain overhang) • Reference price: • Calculated using CRSP mutual fund holding data (2003  2009) • Code is tested and ready to use for calculating capital gain overhang for the whole data set • Capital gain overhang: • Calculated using CRSP daily stock file • Code still require minor adjustments (stock price) we are not using adjusted prices right now, but we will add that later • Important progress: • Extracted the monthly first trading day from CRSP daily stock file to use in calculating rolling portfolios

  5. Progress (Capital Gain overhang) • Next step: • Calculate the Capital gain for all the companies using SAS after adjusting the stock price • Use extracted first trading day to calculate rolling portfolios. • Integrate/test CAR, Gt, RPt codes to use simultaneously to calculate rolling portfolios. • Apply Capital gains to sort rolling portfolios • Problems: • Calculating the capital gains overhang for 2 mutual funds took 10 minutes • Hard, takes time to debug errors in the code (slow progress)

  6. Snapshot result (CAR)

  7. Snapshot result (capital gain overhang)

  8. Next, calculating rolling portfolios Example of rolling portfolios, rolling period = (+2) DEC 2003 JAN 2004 FEB 2004 MAR 2004 Portfolio 1 Portfolio 2 Portfolio 3 • Rolling periods could be: • (+1): Every month • (+2): Every two months • (+3): Every three months

  9. Calculating rolling portfolios Time (rolling periods = (+1)) DEC 2003 JAN 2004 FEB 2004 MAR 2004 - - - - - - - - - - - - - -  end period Top 20% Quintile 5 IBM MSFT DELL . . DELL MSFT IBM . . HP MSFT DELL . . IBM MSFT DELL . . Next 20% Quintile 4 Sort using (most recent) CAR, and or capital gain Take top 20%, portfolio returns, regress, alpha Take next20%, portfolio returns, regress, alpha Take last 20%, portfolio returns, regress, alpha

  10. Best fit line (Alphas) • Next Step: • Regress results as shown below • Calculate the intercept (alpha) Quintile portfolio Excess return Portfolio excess return Market excess return

  11. Questions?

More Related