FINM 8100 Applied Project in Finance

Requirements:

1. Use STATA to replicate table 5-8          2.Write down the method of replication of table 8                 3.Mark each table in STATA code.(do.file)         4.Use GMM method to do the extension  in STATA and write down the process and analysis of this extension 

Send me the code and each table once you finish one (e.g. once you finish replicating table 5, send me the code and table immediately)

replicate table 8 without using boostrap

 

 

FINM 8100 Applied Project in Finance
ANU – Semester 2, 2019

Discussion Notes for Workshop, Week 3

Ferson and Harvey (1991)
1) Databases and Downloading Data
The paper (in its longer form) provides enough detail to satisfy all the data requirements
for a replication of the study:
– The necessary time series of instrumental variables (for forecasting regressions) can
be sourced from the following databases:
Instrumental Variable Database
XEW

CRSP Stock File Indexes – Monthly Index Built
on Market Capitalization;
NYSE only, Return only.

HB3

CRSP Index / Treasury and Inflation;
US Treasury and Inflation Indexes;
Monthly Return Data.

JUNK

FRED Economic Data Website;
Moody's Seasoned Aaa Corporate Bond Yield;
Moody's Seasoned Baa Corporate Bond Yield.

DIV

Historical S&P500 Price and Dividend Data
from Robert Shiller’s website;
Stock market data used in my book, Irrational
Exuberance [Princeton University Press 2000,
Broadway Books 2001, 2nd ed., 2005] are
available for download, U.S. Stock Markets
1871-Present and CAPE Ratio;
Use data to calculate the sum of previous year's
dividends / current price.

TB1

CRSP TREASURIES – Monthly Riskfree Series
(1-month and 3-month);
TREASNOX / Term Type Description 2000001-
Risk Free 1-Month;
Using the monthly annualized yield calculated
from the bid.
JAN DUMMY IF statement in Excel.
– The time series of economic variables (for the multiple-beta model) can be sourced
from the following databases:
Economic Variable Database
XVW

CRSP Stock File Indexes – Monthly Index Built
on Market Capitalization;
NYSE only, Return only.

PREM

Morningstar Bond Index Portfolios;
IA Barclays US HY Corporate Bonds;
IA SBBI US LT Govt TR USD.
ΔSLOPE FRED Economic Data Website;
10-Year Treasury Constant Maturity Rate,
Percent, Monthly, Not Seasonally Adjusted;
3-Month Treasury Bill: Secondary Market Rate,

Page 2

Percent, Monthly, Not Seasonally Adjusted.

U1

CRSP Index / Treasury and Inflation;
US Treasury and Inflation Indexes;
Monthly Inflation Data.
Refer to footnote 13 in the extended version of
the paper for the time series model employed
by the authors to forecast the inflation rate (use
the provided slope and constant coefficients).

CGNON

FRED Economic Data Website;
Real Personal Consumption Expenditures:
Goods: Nondurable goods, Percent Change
from Preceding Period, Monthly, Seasonally
Adjusted.

REALTB

CRSP Index / Treasury and Inflation;
US Treasury and Inflation Indexes;
Monthly Return and Inflation Data.

– The time series of the returns for risky assets (the stock, industry and bond portfolios)
can be sourced from the following databases:
Asset Returns Database
Decile Stock Portfolios CRSP Stock File Indexes – Monthly Index Built on Market Capitalization;

NYSE only, Return only.

12 Industry Portfolios 12 Industry Portfolios from Ken French’s website;
Average Value Weighted Returns – Monthly (%).

LT Corp and Gov
Bonds

Morningstar Bond Index Portfolios;
IA SBBI US LT Corp TR USD;
IA SBBI US LT Govt TR USD.
6-Month TBills Treasury / Monthly (Legacy);

CRSP Fama TBill Structures – 6 Months;
Holding period returns in bid;
5 to 6 months.
from the end of the legacy series (Nov 2014), the data is obtained from:
CRSP TREASURIES – Fama Treasury Bill Term Structure Series;
2000027-Fama 6 Month T-Bills – 6 Month;
Month-Adjusted Bid Hold Return.

2) Be Mindful of Units
Different databases will provide the data in different units – some will be in decimal form
and some will be in percentages
– Your responsibility to be consistent throughout the project – pick one, can’t mix!
– The descriptive statistics in Table 4 in the extended version of the paper are in
percentages (per month)
– Table 4 figures should be matched to see if you can get close to the descriptive
statistics reported by the authors for the full sample (May 1959 – December 1986)

3) Questions?