gaobinwang / dier-replication

Replication files for the paper Directional Information In Equity Returns.

Replication Files for Directional Information in Equity Returns

This repository contains replication files for the paper Directional Information in Equity Returns by Luca Del Viva, Carlo Sala and Andre B.M. Souza. The paper is available here.

Authors

Luca Del Viva, Carlo Sala, and Andre B.M. Souza.

Software Requirements

This code requires Matlab, Stata, R, and access to a command prompt to run .sh files.

Data requirements

This code assumes there exists files named CRSP_Daily.dta and CRSP_Monthly.dta in data/inputs. These files should be downloaded from CRSP.

Instructions

To construct the probability score, run the script ConstructProbScore.sh in the folder code. Alternatively, you can run the scripts Preparing_Daily_Variables.do,Preparing_Weekly_Variables.do,Preparing_Monthly_Variables.do, Aggregate_Data.do, Create_ProbScore_OOS_Parallelized.R and Create_Main_Strategies.do. Once the probability score is constructed, you can run the analysis to replicate Tables 1 and 2 in the paper by running the script RunAnalysis.sh.

Data

Important Disclaimer: The data used in this study was downloaded from the following sources in April, 2023.

• CRSP_Daily from the WRDS (crsp_a_stock).
• CRSP_Monthly from the WRDS.
• Fama_French_Daily from Kenneth French's website
• Fama_French_Monthly from Kenneth French's website.
• All_Factors.dta is an authors' compiled file. This file contains:
  1. Excess Market returns, the risk free rate, SMB, HML, RMW, CMA, UMD factors from Kenneth French's website
  2. BAB, BAC, BAV, QMJ
  3. FMAX, PEAD, FIN, LIQ
  4. Q-Factors
  5. Staumbaugh Yuan Factors obtained from Robert Staumbaugh's website
  6. Idiosyncratic Vol (authors construction).

Additional Resources

Replication files for Understanding Momentum and Reversals (Kelly, Moskowitz and Pruitt, 2021)