STAT 486/686 Assignments FAQ
[display all FAQ answers]
General
On the syllabus the class is instructed to Re-Read TWF Ch 1-8. Is TWF "Models for Investors in Real World Markets" or "The Intelligent Investor". Also, I was not aware that we were suppose to have already read these chapters, and it will be quite a task to have them complete by Thursday. Are there specific chapters that would be more useful for class Thursday and other chapters that could be read this weekend?
Should a group consist of only undergraduates or graduate students, since there are different requirements for 686 students? If a group does contain students from both 486 and 686, then how does it deal with the differing requirements?
Is assignment 0 to be presented in a "professional manner" or can it be hand written?
Should we list all of the constituent company names for the indexes or can we just provide a link? The instructions didn't specify and listing all of the names would go well above the 3 page limit.
How do I obtain returns with dividends from CRSP? Do I have adjust prices for dividends and splits, etc?
How do I obtain daily index data? WRDS says we do not have Compustat Global Index Prices subscription.
Market Indexes and Components
Should we be working on homework 1 in a group?
Our group is having trouble finding FTDOY, LTDOY, and number of trading days for each year. Does anyone have any idea?
Mandelbrot Review and A Bad Backtest (k-Best Stock selection)
Where did the S486 universe come from?
Past data is not meaningfrul for this exercise.
Benchmarks
With regard to the dates, are you requiring that we calculate returns over 1 year defined as the time between FTDOY and LTDOY, and NOT the full 365 (or 366 for leap year) calendar year?
When you use the phrase "if possible" when discussing benchmarking annual returns...what do you mean?
Where did you get the benchmark data for the Dow and the Russell 2000/3000? We could not locate the data on WRDS or CRSP. I have data downloaded from Bloomberg that is similar to the benchmark, however the data runs from (12/31-12/31) rather than (1/01-1/01), so I was wondering where you got Dow and Russell so I can calibrate exactly to your data.
Our team is having great difficulty finding data for the S&P 500 values for each of the four categories: market weighted dividends, market weighted no dividends, equal weighted dividends, and equal weighted no dividends. While CRSP provides information, it only gives the percentages and not the actual annual dollar values. Furthermore, the S&P website seems to provide only market weighted no dividends annual values and only back to 1988.
I wonder whether the Dow Jones annual return data come from WRDS. I wasn't able to find it under either CRSP or Compustat. If it's not, could you please point out a direction of where we should be looking for the data? You have suggested us to go to the Dow Jones official site for total return data. The Dow Jones Total Return on the site is only available in daily, not yearly, and it only goes back to 1987. See http://www.djaverages.com/?go=industrial-index-data
We are having difficulty finding data for Russell and NASDAQ as well... It seems the only place that provides market weighted vs value weighted data is WRDS. Yet we could not find any data of Russell or NASDAQ.
Additionally, how do we normalize data for the year, if we are able to get it.
I've been exploring WRDS but with the exception of NYSE/AMEX, I can't find any information summarized by index with which to construct benchmarks. Do you intend for us to identify the membership of each index by year (86 years), look up the permno's for each stock, and pull this information from CRSP for each of the DJIA, SP500, NYSE/AMEX, RUT3000, RUT2000? If that is your intention, can you please tell me if you will be assigning this amount of work for each of the homeworks? We did something similar for just the 10 dogs of the Dow over 30 years in Stat 686. It took a very long time and was considered a project level undertaking. I've added 482 on top of an already heavy load because I'm interested in the topic. So I'm eager to know if I should be auditing the class instead of taking it.
How do we get the master list of "permno" of each company we need the data for. I was thinking of taking the list of "permno" and putting it in the CRSP/CRSP-Merged to get the annual variables for each of the companies(public and private).
The instructions state "If a strategy outperforms a benchmark return by 1 percentage point over 30 years, we need to know if that is a significant amount." What does strategy refer to in this context? What does it mean by "outperforms a benchmark return by 1% over 30 years?" And should we make decision about the significance of this strategy as part of our solution?
CAPM Validation
I am wondering what ARCA index means in CAPM project.
What is "w'r"?
How do we calculate the "actual annual return" for a portfolio?
Data Collection and Cleaning
Where we could find the data for market cap from 1926-1949? We couldn't seem to find it on the CCM database.
The instructions use the abbreviations TA and CA in various definitions; however, based on Chapter 4 in QFA and the CRSP/Compustat terms, it seems as though ACT (Current Assets - Total) works in place of both TA and CA. Am I understanding this correctly?
Do you want three separate portfolios based on each variable or can we do one portfolio based on a combination of our three variables? We have already constructed a portfolio that ranks our companies by each variable at different levels. For instance, we used market cap as our primary variable, then sorted by dividend yield as our secondary variable, and then sorted by price/sales as our third variable. Furthermore, we discussed why we ranked each variables in this way.
Dogs of the Dow
In some of the sample assignments people distinguished between annual return and total return. Do you know the difference between the two?
Buy and Hold with the Best (Graham/Dodd Analysis)
I cannot fiund the Buy and Hold assignment?
Where can we find Graham's Table 14-3? Is it in the textbook? Or is it in the Security Analysis?
For the Earnings per Share (and cash flows for that matter), do you recommend (Diluted or Basic) and including or excluding extraordinary items?
What should we use for debt?
If the company de-lists or goes private (ie American Can) that the portfolio is rebalanced and we stay in 100% equity for the positional analysis as of 12/31/2010, or do we just place that portion in some lame money market?
How are the stability index and Growth values calculated?
We aren't sure exactly what types of tables we are expected to make: should we make a different table for each year from 1970 on, or something else?
We noticed in the PERMO's we were given in the assignment, one of the companies listed is "Beatrice," yet we cannot find any record of this company in the DJIA. Maybe you can clarify this for us?
We couldn't seem to match our result for PE ratio. We used the variable NIADJ -- Net Income Adjusted for Common/Ordinary Stock (Capital) Equivalents, divided by CSHPRI -- Common Shares Used to Calculate Earnings Per Share - Basic. But we got a much smaller number than the listed 11. Do you know where the problem could be?
Max-Median Rule
Could we use log return for ranking the portfolio rather than simple gross return? Why or why not?
For reproducing the results, are the charts and tables in the provided slides the only ones we need to reproduce? Or do we need to produce any other result mentioned in the paper?
Hi I was wondering how long we should back-test our program, my computer crashes if I go from 1925-2010, R freezes because the file is too large (3GB). Would back-testing from 1980-2010 be acceptable? Otherwise is there a more powerful computer that I can use at Rice?
Since the S&P 500 is always changing, is there anyway that we can get the prices or returns of the changing companies directly online without manually type in the permno in compustat?
We are wondering what role the CFACPR variable plays in the calculations. Our understanding of the assignment is that we compute the daily ratios for each stock in the S&P 500, then find the median ratio value for each stock for the year and select the 20 highest to invest in the next year. We then calculate our returns from investing in those 20 stocks for the year. Where exactly would the CFACPR variable come into play?
We having some issues with Excel and Bloomberg. We are pulling daily data from bloomberg using the compustat database's records of S&P constituents, but it is taking an extremely long time to pull the data for the S&P 100 and 500. The s&p 100 constituents will take around 2 hours to pull, and we're estimating that for the 500, it will take about 10 hours. We are also having problems with excel crashing due to the size of these spreadsheets (around 11,000,000 data points in our S&P 500 spreadsheet). Any suggestions that you could give us would be greatly appreciated.
In the table on slide 7, there is a column that lists "Median Weight Return." Could you describe the methodology behind calculating those returns? Our best guess at this point, hesitantly confirmed by Sarah Tooth, is that the column describes the weighted median of the 20-stock Max Median portfolio.
For investing with one present value dollar starting from 1970, does it mean we initially invest $1 dollar in 1970 currency value or initially invest $1 in 2016 value (aka 1/(1.02^36) in 1970 value)?
WRDS/CRSP Variables
In the description of HW #3 you say that market cap should be readily available however I am not seeing it on Crsp merged database. I have found a variable called "Market Value" but I do not think this is what I want. If I cannot find the variable should I just multiply "common shares outstanding" by "closing annual price"? I am reluctant to do this though because you said to avoid using price data in our calculation.
Regarding CFO, "CFOPS" does not appear in the CCM variable list. What should we use for this?
Regarding CFO, we used XOPR, would that be best?
The data is improperly formatted. The data entered for fiscal year end and actual filing data is not recognized as a date. Because of this the functions that calculate the amount of days in between 2 dates do not work. There are about 2000 observations for each of the 16 years, thus I think it's a little unreasonable for me to go through and manually calculate this for each observation. I'm not really sure what I should do.
What kind of returns are we using? Are we pulling these directly from CRSP database or are we calculating these? CRSP has Equal-Weighted and Value-Weighted Returns. Which should we use?
Backtesting
Which one exactly is the result we are supposed to beat? The "value decile intersection, 50 stocks" returns, or what?
Do we have to beat him on total return since 1963? Or by 10-yr returns, (average or compound)? Sharpe ratio?
Do we have any restriction on the number of stocks in the portfolio?
Are we rebalancing on an annual basis?
Final project
Where is the assignment posted?
How much flexibility do we have in designing our project?
Which one exactly is the result we are supposed to beat? The "value decile intersection, 50 stocks" returns, or what?
Do we have to beat him on total return since 1963? Or by 10-yr returns, (average or compound)? Sharp ratio?
Do we have any restriction on the number of stocks in the portfolio?
Are we rebalancing on an annual basis?