Professional Documents
Culture Documents
Week 5 Empirical - Methods 2 PDF
Week 5 Empirical - Methods 2 PDF
Guanglian Hu
University of Sydney
[S1 2020]
CRSP
Compustat
The Center for Research in Security Prices (CRSP) U.S. Stock Database
contains comprehensive information on equity securities listed on the major
stock exchanges in the U.S. (e.g, NYSE and NASDAQ). It also provides
information on stock market indices.
The CRSP database contains information on price and quote, holding period
returns, trading volume, shares outstanding, identifiers and distribution.
It comes with a monthly data file (end of month) and a daily data file (end
of day).
CRSP annual products are updated each year in February, and consist of
data for the entire previous year.
Web Queries
E [ri ] − rf = βi (E [rm ] − rf );
where Rtei is the excess return of stock i, and ft is the excess return of
the market.
We also want to know whether all the pricing errors are jointly equal
to zero.
E [ri ] − rf = βi (E [rm ] − rf );
where Rtei is the excess return of stock i, and ft is the excess return of
the market.
E (R ei ) = λβi + αi , i = 1, 2, 3, ......N
where E (R ei ) is the average return of stock i. Note that you can run
the above regression with or without intercepts. The residuals αi are
the pricing errors.
According to CAPM, λ should be positive and close to the market
risk premium. Also the residuals of the second stage regression αi ,
should be equal to zero.