Running multiple event studies using the loop command

[James Nelson]

Dear Statalist users,

I am new to posting in Statalist and was hoping I could find some help on loop and matrix commands.

I am conducting an event study of the impact of central bank announcements on foreign stock market returns. I have reviewed the suggestions made previously on this site and have created a program which effectively produces the abnormal returns (ARs) and cumulative abnormal returns (CARs) for a single announcement. The event window is 40 days around the event day with an estimation window of roughly half a year (180 days) prior. Here is the code for a single event which I created following the guides from Princeton (https://dss.princeton.edu/online_hel...ventstudy.html) and Dr. Woochan Kim (http://www.sunwoohwang.com/Event_Study_STATA.pdf),

gen ret = 100*ln(RealPrice[_n]/RealPrice[_n-1])

gen day_cnt=_n
tsset day_cnt
tssmooth ma mkret = ret, window(100,1)
gen target_day=day_cnt if Change<0
egen target_id = group(target_day)
egen max_target_day=max(target_day)
gen evday=day_cnt-max_target_day

sort evday
gen evt_window=1 if evday>=-20 & evday<=20
gen est_window=1 if evday<=-21 & evday>=-200
drop if evt_window==.&est_window==.

qui reg ret mkret if est_window==1
gen rmse=e(rmse)

predict phat
gen ar=ret-phat if evt_window==1
drop phat
drop if evt_window==0
keep if evday>=-20 & evday<=+20
egen car=sum(ar)
gen tstat=car/(rmse*sqrt(_N))

gen car_ca = sum(ar)
list ar car_ca car tstat
graph twoway line car_ca evday

However I am having a difficult time with two issues in extending this program to further events,

1. There is a total of 52 events across the time sampled, 1990m1 - 2009m12. I would like to build a loop which can store the ARs and CARs from each announcement. In this manner I can...
2. Calculate the average ARs and CARs for the whole period.

I am using STATA 15.1

Here is a snapshot of my data. In this example I am looking only at negative surprises (i.e. when actual interest rate changes<expected interest rate changes), so that is why the target_id does not count positive surprises.

* Example generated by -dataex-. To install: ssc install dataex
clear
input long Date double RealPrice str6 NewtargetFFrate str5 Change byte Surprise str3 Expected float(ret day_cnt target_day target_id mkret)
12161988 2464.0391 "0"     "0"       0 "0"    -2.8297124  980    . .    .05851697
12191988 2371.7617 "0"     "0"       0 "0"      -3.81689  981    . .   .014021377
12201988 2395.5908 "0"     "0"       0 "0"      .9996869  982    . .   .008627481
12211988 2460.5762 "0"     "0"       0 "0"      2.676567  983    . .    .03253506
12221988 2496.4266 "0"     "0"       0 "0"       1.44648  984    . .    .06023775
12231988 2494.6437 "0"     "0"       0 "0"   -.071443595  985    . .   .072360724
12261988 2477.7128 "0"     "0"       0 "0"     -.6810037  986    . .     .0770777
12271988 2466.8838 "0"     "0"       0 "0"     -.4380142  987    . .    .06843801
12281988 2440.3787 "0"     "0"       0 "0"    -1.0802503  988    . .    .07005557
12291988 2444.1652 "0"     "0"       0 "0"      .1550401  989    . .    .06855935
  121989 2362.7816 "0"     "0"       0 "0"    -3.3864064  990    . .    .03809728
  131989 2327.7026 "0"     "0"       0 "0"    -1.4957796  991    . .   .022140115
  141989 2317.2013 "0"     "0"       0 "0"     -.4521651  992    . .   .024277734
  151989 2342.0382 "9"     "31.25"  -7 "38"    1.0661454  993  993 3   .036884636
  161989 2346.0133 "0"     "0"       0 "0"     .16958435  994    . .    .05970508
  191989 2331.7127 "0"     "0"       0 "0"     -.6114358  995    . .    .06971015
 1101989 2295.6297 "0"     "0"       0 "0"    -1.5595877  996    . .    .05868369
 1111989 2295.3626 "0"     "0"       0 "0"    -.01163583  997    . .    .04518678
 1121989 2335.5932 "0"     "0"       0 "0"      1.737508  998    . .   .034511913
 1131989  2360.314 "0"     "0"       0 "0"     1.0528755  999    . .    .03878065
 1161989 2389.6377 "8.5"   "-25"     4 "-29"   1.2347103 1000    . .    .05540232
 1171989 2444.1239 "0"     "0"       0 "0"      2.254497 1001    . .    .08175389
 1181989 2417.8188 "0"     "0"       0 "0"    -1.0820924 1002    . .    .07725401
 1191989  2378.164 "0"     "0"       0 "0"     -1.653705 1003    . .    .06821929
 1201989 2395.4742 "8.25"  "-25"   -17 "-8"     .7252446 1004 1004 4    .07172761
 1231989 2370.7793 "0"     "0"       0 "0"    -1.0362487 1005    . .    .05284029
 1241989 2360.8008 "0"     "0"       0 "0"     -.4217836 1006    . .    .03849471
 1251989 2361.0746 "0"     "0"       0 "0"    .011597087 1007    . .   .013611864
 1261989 2389.8247 "0"     "0"       0 "0"     1.2103162 1008    . .   .003226084
 1271989 2399.5271 "0"     "0"       0 "0"       .405166 1009    . .   .007926226
 1301989 2378.5798 "0"     "0"       0 "0"     -.8768089 1010    . .  -.003822959
 1311989 2368.4818 "0"     "0"       0 "0"     -.4254428 1011    . .  -.005608775
  211989 2355.9894 "0"     "0"       0 "0"    -.52883923 1012    . .    .02691932
  221989 2365.0959 "0"     "0"       0 "0"      .3857804 1013    . .    .03531341
  231989 2395.7901 "0"     "0"       0 "0"       1.28945 1014    . .    .03545245
  261989 2400.4548 "0"     "0"       0 "0"     .19451474 1015    . .   .016686652
  271989 2399.9275 "0"     "0"       0 "0"   -.021969084 1016    . .     .0103428
  281989 2401.2843 "0"     "0"       0 "0"     .05651907 1017    . .   .018845793
  291989 2390.9525 "9.125" "12.5"    1 "11"    -.4311897 1018    . .   .016037846
 2101989 2382.9063 "0"     "0"       0 "0"     -.3370945 1019    . . -.0025060754
 2131989  2361.808 "0"     "0"       0 "0"      -.889345 1020    . .  -.011229324
end

Below is my code:

*Creating my AR matrix and running my loop. This is where I run into my problems*
mat mat_ar = J(41,52,.)

foreach x of varlist target_id{
    egen max_target_day=max(target_day) if id==`x'
    gen evday=day_cnt-max_target_day

    sort evday
    gen evt_window=1 if evday>=-20 & evday<=20
    gen est_window=1 if evday<=-21 & evday>=-200
    drop if evt_window==.&est_window==.
    
    qui reg ret mkret if est_window==1
    gen rmse=e(rmse)

    predict phat
    mat mat_ar[`a', `i'+1] = ret-phat if evt_window==1
    drop phat
    drop if evt_window==0
    keep if evday>=-20 & evday<=+20
    
    egen car=sum(ar)
    gen tstat=car/(rmse*sqrt(_N))
    gen car_ca = sum(ar)
}

*Calculating the average ARs over the sample and the overall CAR and significance*
egen AR_mean = rowmean(mat_ar)
egen CAR_mean = sum(AR_mean)
gen tstat = CAR_mean/(rmse*sqrt(41))
gen CAR_sum = sum(AR_mean)
list AR_mean CAR_sum
graph twoway line CAR_sum evday

*Visualizing the announcement impact*
list ar car_ca
graph twoway line car_ca evday

My event window is <-20,1,+20> so I create a matrix with 41 rows and 52 columns comprising the 52 events. Then I attempt to run the event study regression 52 times, storing the 41 AR values in a column of the matrix. In the end I hope to average across the rows to calculate the average AR for each evday. This way I can calculate the eventual CAR for the period.

However I am new to using loops in STATA and was hoping someone could help advise on how to continue? What I am looking for is rather simple but I am unfamiliar with the commands. Is there a simpler approach to calculating the mean ARs and overall CAR for the sample?

I am open to your advice, thank you.

[Mike Lacy]

Your question covers a lot more territory than can easily be answered in a single post. Here are a few suggestions to get you started:

1) Try taking another look at -help foreach-. I say this because your foreach command only requests iteration over one variable.

foreach x of varlist target_id

-foreach- is intended to iterate over some set of variables, or some list of values. Perhaps you mistakenly thought that this command would iterate over the values of -targetid-? (It won't.) What did you think this -foreach- structure would do?

2) See -help statsby-, which I will show you a more built-in way to collect statistical results than what you are trying. This will require making your code into a program using the -program- command, and storing the results in the return list, but I think that you would find that easier to learn about than what you are trying to do. An rclass program would be fine for your purposes.
3) Your posting requires some knowledge about event studies and the related vocabulary, yet I think your problem is actually a straightforward programming problem that would not require such knowledge. There's a larger set of people that could help you if you explain your goals without requiring knowledge in your research area.
4) You know what your variables mean, but we (mostly) don't. That gap makes helping you harder.