Continuously compounded returns

[Sarah Hussein]

Hello Statalist
I've been trying to calculate a Continuously compounded returns on S&P500 index, daily data
as follows:
(1+r[1])+(1+r[2])+.....+(1+r[n])
So I think it should be in a loop

any help is highly appreciated

[William Lisowski]

First, your formula is incorrect. Those plus signs should be multiplication signs. Otherwise after 5 working days with 0 return on each of the days, your compounded return would be 500%.

Second, it need not be in a loop. The general principle is, assuming a variable r containing the daily return, is

generate cr = (1+r)
replace cr = cr*cr[_n-1] if _n>1
replace cr = cr-1

[Joro Kolev]

William showed one way of doing it.

There is also the user contributed -egen, prod-, which calculates products.

net describe dm71, from(http://www.stata.com/stb/stb51)

[Sarah Hussein]

Thank you so much

[Sarah Hussein]

I tried that code, it generated a vector of [.]

[Joro Kolev]

Show a sample of your data, using -dataex-, and say what you want to calculate from your data.

I tried that code, it generated a vector of [.]

[William Lisowski]

Works for me. Did you forget the if clause in the first replace command?

. generate cr = (1+r)

. replace cr = cr*cr[_n-1] if _n>1
(9 real changes made)

. replace cr = cr-1
(10 real changes made)

. list

     +------------------+
     |    r          cr |
     |------------------|
  1. |  .02         .02 |
  2. | -.03      -.0106 |
  3. |  .02    .0091881 |
  4. | -.01   -.0009038 |
  5. | -.03   -.0308766 |
     |------------------|
  6. | -.01   -.0405679 |
  7. | -.02   -.0597565 |
  8. | -.05   -.1067687 |
  9. |  .00   -.1067687 |
 10. |  .04   -.0710395 |
     +------------------+