Assignment, Malaysia

Securities & Portfolio Management Assignment 101

So, recently I have been receiving stress-and-panic-induced questions about one of the subject I am taking this semester: Securities & Portfolio Management. We are assigned to analyze the effect of 3 events (Subprime Mortgage, 1MDB scandal, and Brexit) towards listed companies’ performance (taking 25 companies as a sample) using Cumulative Abnormal Return approach. I am gonna share everything that has been asked so far, so feel free to refer to this first before shooting another question.

Here is the FAQ.

  1. What’s the first thing I should do before collecting data?
    Set the event study window – what’s the first day and the last day you are supposed to collect the historical data.
  2. What’s the data I should obtain for the assignment?
    Share price of 25 companies, for 220 days pre and post event. You’ll need to collect the market overall performance – KLCI (Kuala Lumpur Composite Index) too to be set as your benchmark.
  3. I find it hard to use Bloomberg Terminal to collect the data. What’s the alternative I could use?
    Try finance.yahoo.com to collect company’s share price. You may go to KLSE’s website of Yahoo Finance to get KLCI’s historical data.
  4. I couldn’t see the closing price from the preview. Did I do something wrong?
    No. Just download the file, you’ll see it inside.
  5. I couldn’t find the historical data on some events. Did I do something wrong?
    No. the data might not exist at that point of time, hence no share price could be obtained. So, check the IPO date of the company. They may only IPO recently even if it has been established for years. If they haven’t IPO-ed at that the time you are looking for the historical data, you won’t be able to see the share price because the share wasn’t traded yet.
    If that’s the case, ask for replacement for the companies by consulting with the lecturer.
  6. There are so many prices. I don’t know which price I should take.
    Opening price: yesterday’s closing price
    High, low, closing price: well, you can tell from its name
    Adjusted closing price: share’s closing price, adjusted with any distributions (e.g: dividend payment) or other company’s actions on the given day anytime before the next day trading session.So, you’ll need to take non-adjusted closing price as it reflects the real performance on a given day.
  7. What happen if there are dates when it has the data on company’s share price but not in KLCI’s side, and vice versa?
    Take the average
  8. Do I have to check one by one to ensure the date on both sides are the same?
    Yes. Let the excel do the job for you by using “exact” formula and drag it all the way down.
  9. Do I have to exclude Saturday and Sunday?
    It should be automatically excluded since no trading is happening on both days – hence, no share price will be given.
  10. How to make the copy-pasting process less painful? I have to fix the formatting every time.
    Use ctrl+shift+v to paste only the values, without the formatting
  11. Do I have to calculate the company’s return, expected return, abnormal return, alpha, beta, and cumulative abnormal return (CAR) on my own?
    Let the formula do the job for you. It’s already given in the sample.
  12. Why some of my manual calculation has different result with what excel calculates?
     a. You might calculate it wrongly
    b. You might select the wrong cell in excel
    c. There might be changes in the data input (like you delete, or you adjust the value). So you gotta refresh the calculation that excel do by dragging the formula down, since each figure is related to one another.
  13. Why do I have to calculate all those things when I only need CAR value?
    You won’t arrive to that CAR figure without the other components.
  14. Why I couldn’t use Wikipedia as a source in writing the report?
    It’s a good place for reading, but definitely not something you can cite for your report. Everyone can contribute to any of Wikipedia page regardless their expertise, hence there is an issue in reliability. Try using Investopedia instead.
  15. Do I have to calculate CAR for all 440 days?
    No. It’s normally calculated in a smaller windows – most of the time in days. So you can take like 1 week before and after the event.
    Why? Compounding daily abnormal returns can create bias in the results, as the other effect from the other event might affect the performance too.

P.S: I’ll be adding more should I receive more questions.

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