Compustat and the risk-free rate of return
Posted: 15 May 2013 11:05 AM   [ Ignore ]
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Dear Forum members,

I am working with Compustat quarterly and will calculated quarterly market returns (over the entire compustat universe), which will be possible using the variables given by the Compustat data (stock prices etc.).

However, I want to compare the market return with a risk-free rate of return (to get the excess return). Do you have any suggestions on a) which risk-free rate to use (e.g. 10y U.S. Gov. Bonds) and b) where to get this return from (data source) and how to match with Compustat?

The final goal of my analysis is to construct a Markov regime switching model. I want to analyze bull/bear periods and company fundamentals. I am working with STATA.

Thanks for your suggestions.
Chris

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Posted: 24 May 2013 03:10 PM   [ Ignore ]   [ # 1 ]
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hi Chris,

Sorry for not replying to your post earlier. A good option for the risk free rate is one month treasury bill rate in the Fama French dataset. See: http://wrds-web.wharton.upenn.edu/wrds/tools/variable.cfm?library_id=32&file_id=53535

This risk free rate—and the other factors—are very much ‘accepted’ in finance.

Hope this helps,

Joost

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Posted: 25 May 2013 10:06 AM   [ Ignore ]   [ # 2 ]
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Thanks for that reply. I came across the same measure recently and will use it for my purposes.

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