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How to use %idvol macro to calculate month end idiosyncratic volatility?

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Occasional Contributor
Posts: 7

How to use %idvol macro to calculate month end idiosyncratic volatility?

Hi there,


I am trying to calculate month-end idiosyncratic volatility for every stocks with 250 daily returns (at least 125 data points).

I came across the macro %idvol in WRDS however this program doesn't allow for 1 month step. The only thing I can do is to run it for every day.

Given that, it seems very troublesome and time-consuming to calculate IVOL for all stocks for 40 years of analysis

IS there any way to get around this problem? Can we modify the program to make it jump every month?

Thank you very much for any help!

Dennis

The code is presented below:

/* ********************************************************************************* */

/* ******************** W R D S   R E S E A R C H   M A C R O S ******************** */

/* ********************************************************************************* */

/* WRDS Macro: IDVOL                                                                 */

/* Summary   : Calculates idiosyncratic volatility using time-series monthly/daily   */

/*              regressions for various risk models                                  */

/* Date      : July 07, 2009                                                         */

/* Author    : Denys Glushkov, WRDS                                                  */

/* Variables : - INSET and OUTSET are input and output datasets                      */

/*             - DATEVAR: name of the date variable in INSET dataset                 */

/*             - RETVAR : name of the raw return variable in INSET dataset           */

/*             - FREQ   : frequency of returns in incoming INSET dataset,            */

/*                        m (monthly) or d(daily)                                    */

/*             - WINDOW : the length of the rolling estimation window in             */

/*                        months/trading days over which the idiosyncratic volatility*/

/*                        is estimated                                               */

/*             - STEP   : number of months/trading days by which the estimation      */

/*                        window is rolled forward                                   */

/*             - MIN    : minimum number of non-missing returns in the esitmation    */

/*                        window required for generating valid estimates of IDVOL    */

/*             - MODEL  : risk model used in estimation of idiosyncratic volatility  */

/*                        m (market), ff (Fama-French 3 factor), ffm (FF+Momentum)   */

/* ********************************************************************************* */

%MACRO IDVOL (INSET=, OUTSET=, DATEVAR=, RETVAR=, FREQ=, WINDOW=,STEP=, MIN=, MODEL=);

  

   %local oldoptions errors;

   %let oldoptions=%sysfunc(getoption(mprint)) %sysfunc(getoption(notes))

                   %sysfunc(getoption(source));

   %let errors=%sysfunc(getoption(errors));

   options nonotes nomprint nosource errors=0;

   %let model=%lowcase(&model);%let freq=%lowcase(&freq);

  

  /*Depending on the incoming return frequency, create ancillary macro variables*/

  %if &freq=m %then %do; %let file=monthly; %let inc=month;%let dateff=dateff;%end;%else

  %if &freq=d %then %do; %let file=daily;   %let inc=day%let dateff=date;%end;

  

  /*Depending on the type of the risk model, create the variable list to be extracted*/

  %if &model=m   %then %let vars=mktrf;            %else

  %if &model=ff  %then %let vars=mktrf smb hml;    %else

  %if &model=ffm %then %let vars=mktrf smb hml umd;

  

  %put ### CREATING TRADING CALENDAR;

  proc printto log=junk;

  %Trade_Date_Windows (freq=&freq, size=&window, minsize=&min, outdsn=_caldates);

  proc printto;run;

  %put ### DONE!;

  

  %put ### MERGING IN THE RISK FACTORS;

  proc sql noprint; create table _vol

     as select a.*, b.*, (&retvar-rf) as exret

     from &inset a left join ff.factors_&file (keep=&dateff rf &vars) b

     on a.&datevar=b.&dateff

     order by a.permno, a.&datevar;

     select distinct min(&datevar) format date9.,

                     max(&datevar) format date9. into :mindate,:maxdate

    from _vol;

  quit;

%put ### DONE!;

  

/*Save the beginning and ending position of the earliest    */

/*and the latest dates in the trading calendar              */

  data _caldates; set _caldates;

    n+1;

    if intnx('month',beg_date,0,'e')=

    intnx('month',"&mindate"d,0,'e') then call symput ('start',n);

    if intnx('month',end_date,0,'e')=

    intnx('month',"&maxdate"d,0,'e') then call symput ('finish',n);

  run;

  

/*Main part. Estimate Idiosyncratic Volatility using   */

/*rolling time-series regressions. Boundaries for      */

/*regressions are based on start and end dates in the  */

/*trading calendar                                     */

  %put ### ESTIMATING IDIOSYNCRATIC VOLATILITY;

  proc printto log=junk;run;

  %do j=&start %to &finish %by &step;

  

   data _null_; set _caldates (sortedby=n where=(n=&j));

    call symput ('beg',beg_date);call symput ('end',end_date);

   run;

  

   data _sample/view=_sample;

     do k=1 by 1 until (last.permno);

      set _vol; by permno;

      where &beg<=date<&end;

      if missing(ret) then continue;

      mcount=sum(mcount,1);

    end;

   keep permno mcount;

   run;

  

  data _vvol/view=_vvol;

  merge _vol (sortedby=date where=(&beg<=date<&end)) _sample;

   by permno;

   if mcount>=&min;

   drop mcount;

  run;

  

  proc reg data=_vvol edf noprint outest=_stats;

   by permno;

   model exret=&vars;

  quit;

  

  data _stats; set _stats;

   format start_date end_date date9.;

   start_date=&beg;end_date=&end;

   nused=_p_+_edf_;

   label _rmse_ = " "; rename _rmse_=Idrisk_std;

   keep permno start_date end_date _rmse_ nused;

  run;

  

/*Pool all estimates of idiosyncratic risk together*/

  proc append base=_idvol data=_stats force;run;

  %end;

  proc printto;run;

  

/*Merge the incoming dataset with idiosyncratic risk estimates*/

  proc sql; create table &outset

   as select *

   from &inset a left join _idvol b

   on a.permno=b.permno and a.date=b.end_date;

   /* house cleaning*/

   drop table _stats, _vol, _caldates;

   drop view _vvol, _sample;

  quit;

  options &oldoptions errors=&errors;

  %put ### DONE!;

  %put ### OUTPUT IN THE DATASET &outset;

%MEND;

Super User
Posts: 10,549

Re: How to use %idvol macro to calculate month end idiosyncratic volatility?

Subset the data perhaps?

You might want to post the code of this macro or at least where you found it. A google search only returns this message thread when I search for it.

Occasional Contributor
Posts: 7

Re: How to use %idvol macro to calculate month end idiosyncratic volatility?

Hi, I just copied and pasted the code here for easy reference!

SAS Super FREQ
Posts: 8,744

Re: How to use %idvol macro to calculate month end idiosyncratic volatility?

Hi:

  The code doesn't help without the data. WRDS seems to be the Wharton Research Data Services at the U of Penn. Are you using the data from the server? Did the program have an author? It might work better for you to contact the program author, who must be already familiar with the data you are using.

cynthia

Occasional Contributor
Posts: 7

Re: How to use %idvol macro to calculate month end idiosyncratic volatility?

Hi Cynthia,

The data is from WRDS (UPenn) as well. For example, I can choose the inset to be crsp daily data so I set the frequency to be daily.

You are right. Maybe I should ask the program author.

Super User
Posts: 10,549

Re: How to use %idvol macro to calculate month end idiosyncratic volatility?

It looks like the macro has a parameter freq=m that implies it does monthly processing of some kind, i.e. sets inc= monthly.

The call to macro Trade_date_windows also is another place to look for processing issues.

Any idea if there are other nested macros in Trade_date_windows? Every one might be an issue for the processing you want.

Valued Guide
Posts: 3,208

Re: How to use %idvol macro to calculate month end idiosyncratic volatility?

Just ask your question to your orignal problem before finding that macro.

It could be outdated.

This macro contains  calls to  intnx  SAS(R) 9.3 Functions and CALL Routines: Reference that is build for shifting in time

there are a lot of financial functions implemented. They are  documented by SAS to their normal standards. I assume it is OASIS/java stadnard based. SAS(R) 9.4 Functions and CALL Routines: Reference, Second Edition 

You are probablyl into Basel-III Market-Risk, being described as part of SAS Riskmanagement http://www.sas.com/offices/europe/belux/pdf/events/20101209_10yLux/SAS-RiskManagement-Luxembourg-10y...

---->-- ja karman --<-----
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