There are two macros on the List of WRDS Research Macros: EVTSTUDY and BETA, both of which may be commonly used.
I like the first one, authored by Denys Glushkov. Denys’ code is always elegant. I don’t like the second macro because I believe it contains more than minor mistakes and performs many unnecessary calculations.
Since event study and beta calculation are essentially two sides of the same coin, I developed the following macro to output both event study results (e.g., CAR) and beta estimates. My macro heavily borrows from Denys’ code but differs in the following ways:
- I add beta to the final output. This is the main difference.
- Denys’ macro overwrites original event dates if they are not trading dates, which may result in unintended data loss. I correct this issue.
- Deny uses CRSP.DSIY to generate the trading calendar and market returns, but not all institutions have subscription to it. Therefore, I use the more accessible CRSP.DSI instead (thanks to Michael Shen for bringing this to my attention).
- I enhance efficiency by de-duplicating event dates when generating estimation and events windows.
- Deny’s macro suppresses warnings or error messages, making debugging difficult. I change this setting.
All changes are commented with /* CHANGE HERE */. I compare the results (CAR and beta) from using my macro and those from using a commercial package, EVENTUS (with the help of my friend who has the license to EVENTUS). The accuracy of my macro is assured (Note: EVENTUS does not take delisting returns by default).
Update: WRDS rolled out the event study web inquiry (so-called Event Study by WRDS). I recently checked the accuracy of that product. To my surprise, the accuracy is unsatisfactory, if not terrible.
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%MACRO EVTSTUDY_NEW (INSET=, OUTSET=, OUTSTATS=, ID=, EVTDATE=, ESTPER=, START=, END=, GAP=, GROUP=, MODEL=); /* Summary: Perform event study and calculate beta */ /* Parameters: */ /* - ID : Name of security identifier in INSET: PERMNO or CUSIP */ /* CUSIP should be at least 8 (eight) characters */ /* - INSET : Input dataset containing security IDs and event dates */ /* - OUTSET : Name of the output dataset to store mean CAR and t-stats */ /* - OUTSTATS:Name of the output dataset to store test statistics (Patell Z, etc) */ /* - EVTDATE: Name of the event date variable in INSET dataset */ /* - ESTPER : Length of the estimation period in trading days over which */ /* the risk model is run, e.g., 110; */ /* - START : Beginning of the event window (relative to the event date, eg. -2) */ /* - END : End of the event window (relative to the event date, e.g., +1) */ /* - GAP : Length of pre-event window, i.e., number of trading days between */ /* the end of estimation period and the beginning of the event window */ /* - GROUP: Defines an subgroup (can be more than 2) */ /* - MODEL: Risk model to be used for risk-adjustment */ /* madj - Market-Adjusted Model (assumes stock beta=1) */ /* m - Standard Market Model (CRSP value-weighted index as the market)*/ /* ff - Fama-French three factor model */ /* ffm - Carhart model that includes FF factors plus momentum */ %local evtwin factors abret newvars; %local oldoptions errors; %let oldoptions=%sysfunc(getoption(mprint)) %sysfunc(getoption(notes)) %sysfunc(getoption(source)); %let errors=%sysfunc(getoption(errors)); options notes mprint source errors=0; /*display codes debugging. CHANGE HERE*/ %let evtwin=%eval(&end-&start+1); *length of event window in trading days; /*depending on the model, define the model for abnormal returns*/ %if %lowcase(&model)=madj %then %do; %let factors=vwretd; %let abret=ret-vwretd; %let newvars=(intercept=alpha); %end;%else %if %lowcase(&model)=m %then %do; %let factors=vwretd; %let abret=ret-alpha-beta*vwretd; %let newvars=(intercept=alpha vwretd=beta); %end;%else %if %lowcase(&model)=ff %then %do; %let factors=vwretd smb hml; %let abret=ret-alpha-beta*vwretd-sminb*smb-hminl*hml; %let newvars=(intercept=alpha vwretd=beta smb=sminb hml=hminl); %end;%else %if %lowcase(&model)=ffm %then %do; %let factors=vwretd smb hml mom; %let abret=ret-alpha-beta*vwretd-sminb*smb-hminl*hml-wminl*mom; %let newvars=(intercept=alpha vwretd=beta smb=sminb hml=hminl mom=wminl); %end; %put; %put ### CREATING TRADING DAY CALENDAR...; data _caldates; merge crsp.dsi (keep=date rename=(date=estper_beg)) crsp.dsi (keep=date firstobs=%eval(&estper) rename=(date=estper_end)) crsp.dsi (keep=date firstobs=%eval(&estper+&gap+1) rename=(date=evtwin_beg)) crsp.dsi (keep=date firstobs=%eval(&estper+&gap-&start+1) rename=(date=evtdate)) /*change &evtdate to evtdate. CHANGE HERE*/ crsp.dsi (keep=date firstobs=%eval(&estper+&gap+&evtwin) rename=(date=evtwin_end)); format estper_beg estper_end evtwin_beg evtdate evtwin_end date9.; /*change &evtdate to evtdate. CHANGE HERE*/ if nmiss(estper_beg, estper_end, evtwin_beg, evtdate, evtwin_end)=0; /*change &evtdate to evtdate. CHANGE HERE*/ time+1; run; %put ### DONE!; /*If primary identifier is Cusip, then link in permno*/ %if %lowcase(&id)=cusip %then %do; proc sql; create view _link as select permno, ncusip, min(namedt) as fdate format=date9., max(nameendt) as ldate format=date9. from crsp.dsenames group by permno, ncusip; create table _temp as select distinct b.permno, a.* from &inset a left join _link b on a.cusip=b.ncusip and b.fdate<=a.&evtdate<=b.ldate order by b.permno, a.&evtdate; /*order by both permno and &evtdate. CHANGE HERE*/ quit;%end; %else %do; /*pre-sort the input dataset in case it is not sorted yet*/ proc sort data=&inset out=_temp; by permno &evtdate; /*order by both permno and &evtdate. CHANGE HERE*/ run; %end; /*If event date is a non-trading day, select the closest */ /*trading day that follows the event day */ /*Merge in relevant dates from the trading calendar */ /*CHANGE HERE to improve efficiency and correct errors proc sql; create table _temp (drop=&evtdate) as select a.*, a.&evtdate as _edate format date9., b.* from _temp a left join _caldates (drop=time) b on b.&evtdate-a.&evtdate>=0 group by a.&evtdate having (b.&evtdate-a.&evtdate)=min(b.&evtdate-a.&evtdate); quit;*/ proc sql; create table _temp1 as select a.&evtdate, b.estper_beg, b.estper_end, b.evtwin_beg, b.evtwin_end, b.evtdate from (select distinct &evtdate from _temp) a left join _caldates b on b.evtdate-a.&evtdate>=0 group by a.&evtdate having (b.evtdate-a.&evtdate)=min(b.evtdate-a.&evtdate); create table _temp2 (drop=&evtdate) /*use _temp2 to surpress warnings and retain _temp for later use. CHANGE HERE*/ as select a.*, a.&evtdate as _edate format date9., b.estper_beg, b.estper_end, b.evtwin_beg, b.evtwin_end, b.evtdate from _temp a left join _temp1 b on b.&evtdate=a.&evtdate; quit; %put ; %put ### PREPARING BENCHMARK FACTORS... ; proc sql;create table _factors as select a.date, a.vwretd, b.smb, b.hml, b.umd as mom from crsp.dsi (keep=date vwretd) a left join ff.factors_daily b on a.date=b.date; quit; %put ### DONE! ; %put; %put ### RETRIEVING RETURNS DATA FROM CRSP...; proc sql; create table _evtrets_temp as select a.permno, a.date format date9., a.ret as ret1, b.* from crsp.dsf a, _temp2 b /*change _temp reference. CHANGE HERE*/ where a.permno=b.permno and b.estper_beg<=a.date<=b.evtwin_end; quit; %put ### DONE!; %put; %put ### MERGING IN BECHMARK FACTORS...; proc sql; create table _evtrets1 as select a.*, b.*, (c.time-d.time) as evttime from _evtrets_temp a left join _factors (keep=date &factors) b on a.date=b.date left join _caldates c on a.date=c.evtdate /*change &evtdate to evtdate. CHANGE HERE*/ left join _caldates d on a.evtdate=d.evtdate; /*change condition. CHANGE HERE*/ create table _evtrets (where=(not missing(vwretd))) as select a.*, a.ret1 label='Ret unadjusted for delisting', (1+a.ret1)*sum(1,b.dlret)-1-a.vwretd as exret label='Market-adjusted total ret', (1+a.ret1)*sum(1,b.dlret)-1 as ret "Ret adjusted for delisting" from _evtrets1 a left join crsp.dsedelist (where=(missing(dlret)=0)) b on a.permno=b.permno and a.date=b.dlstdt order by a.permno, a._edate, a.date, a.evttime; quit; %put ### DONE!; %put; %put ### ESTIMATING FACTOR EXPOSURES OVER THE ESTIMATION PERIOD...; %if %lowcase(&model) ne madj %then %do; /*estimate risk factor exposures during the estimation period*/ proc reg data=_evtrets edf outest=_params (rename=&newvars keep=permno _edate intercept &factors _rmse_ _p_ _edf_) noprint; where estper_beg<=date<=estper_end; by permno _edate; model ret=&factors; quit;%end; %else %do; proc reg data=_evtrets edf outest=_params (rename=&newvars keep=permno _edate intercept _rmse_ _p_ _edf_) noprint; where estper_beg<=date<=estper_end; by permno _edate; model ret=; quit;%end; %put ### DONE!; %put; %put ### CALCULATING ONE-DAY ABNORMAL RETURN IN THE EVENT WINDOW...; data _abrets/view=_abrets; merge _evtrets (where=(evtwin_beg<=date<=evtwin_end) in=a) _params; by permno _edate; abret=&abret; logret=log(1+ret); var_estp=_rmse_*_rmse_; nobs=_p_+_edf_; label var_estp='Estimation Period Variance' abret= 'One-day Abnormal Return (AR)' ret= 'Raw Return' _edate= 'Event Date' evttime= "Trading day within (&start,&end) event window"; drop _p_ _edf_ estper_beg estper_end; if a; run; %put ### DONE!; %put; %put ### CALCULATING CARS AND VARIOUS STATISTICS...; proc means data=_abrets noprint; by permno _edate; id &group var_estp; output out=_car sum(logret)=cret sum(abret)=car n(abret)=nrets; /*calculate Standardized Cumulative Abnormal Returns*/ data _car; set _car; poscar=car>0; scar=car/(&evtwin*var_estp)**0.5; cret=exp(cret)-1; label poscar='Positive Abnormal Return Dummy' scar= 'Standardized Cumulative Abnormal Return (SCAR)' car= 'Cumulative Abnormal Return (CAR)' cret= 'Cumulative Raw Return' nrets= 'Number of non-missing abnormal returns within event window'; /*compute stats across all events (i.e., permno-event date combinations*/ proc means data=_car noprint; var cret car scar poscar; class &group; output out=_test mean= n= t=/autoname; /*calculate different stats for assessing */ /*statistical signficance of abnormal returns*/ data &outstats; set _test; tpatell=scar_mean*((scar_n)**0.5); tsign=(poscar_mean-0.5)/sqrt(0.25/poscar_n); format cret_mean car_mean percent7.5; label tpatell= "Patell's t-stat" car_mean= 'Mean Cumulative Abnormal Return' cret_mean= 'Mean Cumulative Raw Return' scar_mean= 'Mean Cumulative Standardized Abnormal Return' car_t= 'Cross-sectional t-stat' scar_t= "Boehmer's et al. (1991) t-stat" car_n= 'Number of events in the portfolio' poscar_mean= 'Percent of positive abnormal returns' tsign= 'Sign-test statistic'; drop cret_N scar_N poscar_N cret_t poscar_t; run; %put ### DONE!; proc print label u; title1 "Output for dataset &inset for a (&start,&end) event window using &model model"; id &group; var cret_mean car_mean scar_mean poscar_mean car_n tsign tpatell car_t scar_t; %if "&group" ne "" %then %do; title2 "Test for Equality of CARs among groups defined by &group"; /*To find out the results of the hypothesis test for comparing groups */ /*find the row of output labeled 'Model' and look at the column labeled */ /*F-value for the Fisher statistic and Pr>F for the associated p-value */ /*HOVTEST tests for whether variances of two groups are the same */ proc glm data=_car; class &group; model scar=&group; means &group /hovtest; proc npar1way data=_car wilcoxon; var scar; class &group; %end; run; /*create the final output dataset*/ %if %lowcase(&model) ne madj %then %do; %let _beta=_params(keep=permno _edate beta); %let _beta_label=beta='Beta'; %end; %else %do; %let _beta=; %let _beta_label=; %end; /*add IF statement. CHANGE HERE*/ data &outset; merge _temp (in=a rename=(&evtdate=_edate)) /*change &inset reference. CHANGE HERE*/ _abrets(keep=permno _edate date evttime ret abret var_estp) _car (keep=permno _edate cret car scar nrets) &_beta; /*add &_beta. CHANGE HERE*/ by permno _edate; rename _edate=&evtdate; /*use original variable name. CHANGE HERE*/ label _edate='Event date' date='Trading date in event window' &_beta_label; /*add &_beta_label. CHANGE HERE*/ format _edate date9. date date9.; if a; run; /*house cleaning*/ proc sql; drop table _caldates, _car, _factors, _test, _params, _temp, _evtrets1, _evtrets_temp, _temp1, _temp2; drop view _abrets; quit; options errors=&errors &oldoptions; %put ;%put ### OUTPUT IN THE DATASET &outset; %put ;%put ### TEST STATISTICS IN THE DATASET &outstats; %MEND; |
Very good!