cumulative market adjusted returns
Posted: 01 September 2014 12:22 PM   [ Ignore ]
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Hello!

I am confused as to how to calculate cumulative market adjusted returns in SAS.  I am also calculating the cumulative abnormal return.  I am finding information on the internet that uses these terms interchangeably and I am so confused.

Can you help?

Thanks!

samme

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Posted: 01 September 2014 12:51 PM   [ Ignore ]   [ # 1 ]
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hi Samme,

Something like this:
- summing ‘raw’ (=actual or, unadjusted) returns over multiple days/months is ‘cumulative return’
- if you want to control for market-wide movements, you subtract the ‘market return’ from the raw return, resulting in summing ‘adjusted’ returns; in that case, you have ‘cumulative abnormal returns’
- there are different ways of adjusting for the ‘market’; one of them is the market model, where the market return is subtracted, in that case you have ‘cumulative market adjusted return’
- other flavors of adjusting are: size adjusted, capm, fama french 3 (or 4) factor model, etc

Hope this help,

Joost

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