topic Re: How do I calculate annual stock beta from daily returns? in SAS Programming

How do I calculate annual stock beta from daily returns?

omars92 — Thu, 29 Nov 2018 07:18:43 GMT

Hello,

I have a time series sample of 4000 firms over 18 years period (2000-2017). I am trying to find a way to use the daily returns in order to estimate the annual beta for each stock. I am unsure of what code to use. Any advice or guidance on how to structure my SAS code is highly appreciated. (SAS version 9.4)

My data is structured as follows:

PERMCO DATE COMPANY_NAME RETURN MARKET_RETURN YEAR PERMCO&YEAR

153 2000-02-01 -0.15 2000 1532000

153 2000-02-02 0.1 2000

153 2000-02-03 0.2 2000

153

153 2017-12-28

674

2114

211

etc...

I would like the output to look something like shown below: (1 beta for each stock per year)

PERMCO YEAR BETA

153 2000

153 2001

153 2002

674 2015

2114 2017

etc...

Thank you

Re: How do I calculate annual stock beta from daily returns?

Ksharp — Thu, 29 Nov 2018 12:50:34 GMT

@Rick_SAS wrote a blog about how to run thousands of Regression before.

proc reg data=have outest=want;

by PERMCO YEAR ;

model RETURN = date;

quit;

Re: How do I calculate annual stock beta from daily returns?

omars92 — Thu, 29 Nov 2018 15:11:52 GMT

Sorry, I should have specified that I’m trying to estimate each stock’s annual CAPM beta (ideosyncratic risk). I have thought of estimating the covariance of RETURN with MARKET_RETURN by PERMCO YEAR and divide by the variance of MARKET return but cannot find a way to get the covariance value without the covariance matrix

Re: How do I calculate annual stock beta from daily returns?

Ksharp — Fri, 30 Nov 2018 13:07:16 GMT

model RETURN = MARKET_RETURN; CAPM beta is just the regression coefficient you can find at OUT=WANT table. beta(correlation ) is covariance of RETURN with MARKET_RETURN when both RETURN and MARKET_RETURN have 0 mean ,1 std .

Re: How do I calculate annual stock beta from daily returns?

omars92 — Thu, 06 Dec 2018 20:31:11 GMT

Thank you Ksharp. The code worked perfectly.