Calculating Abnormal Returns using CAPM-Betas

[Christian Beer]

Dear Stata-Helpers,

although I found quite a number of previous posts covering the calculation of abnormal returns using a market model in event studies, I still do need help in proceeding for myself.

I have firm-day panel data for all S&P 500 firms. Please see an excerpt below. I now want to calculate daily abnormal returns as follows:

"The daily abnormal return is estimated as the difference between the daily logarithm return(i.e., the logarithm of gross return) of a stock and the CAPM beta times the daily logarithm return of the market. The CAPM beta is estimated using daily returns from 2019, and the S&P 500 as the marketi index."

I know that I have to gen logs, run individual regressions, save the betas and proceed as explained above. Anyways, since I don not quite know how to design and run the regressions, I still need some help to get started.

Thank you very much for your help!

Best regards! Christian

* Example generated by -dataex-. To install: ssc install dataex
clear
input str28 co_name str5 co_ticker float date1 double total_return float market_return
"AGILENT TECHNOLOGIES INC" "A" 21885  -.519995048  -.8218834
"AGILENT TECHNOLOGIES INC" "A" 21886  -.311138768  -.8026275
"AGILENT TECHNOLOGIES INC" "A" 21887  1.036204744   .7558059
"AGILENT TECHNOLOGIES INC" "A" 21888   .741381441    .158883
"AGILENT TECHNOLOGIES INC" "A" 21889   .834048816    .911801
"AGILENT TECHNOLOGIES INC" "A" 21892  -.717674249  -.2763599
"AGILENT TECHNOLOGIES INC" "A" 21893  1.604998775  -.1273786
"AGILENT TECHNOLOGIES INC" "A" 21894   .590859761  .26658762
"AGILENT TECHNOLOGIES INC" "A" 21895  1.666267082  1.0362167
"AGILENT TECHNOLOGIES INC" "A" 21896 -1.297016861 -.26927796
"AGILENT TECHNOLOGIES INC" "A" 21899   .884004301   .6442169
"AGILENT TECHNOLOGIES INC" "A" 21900  -.592066311  .04056617
"AGILENT TECHNOLOGIES INC" "A" 21901  -.619416319   .1262117
"AGILENT TECHNOLOGIES INC" "A" 21902  1.294498382   .3582341
"AGILENT TECHNOLOGIES INC" "A" 21903   .804638504   .5968443
"AGILENT TECHNOLOGIES INC" "A" 21906   .082169269  .04139897
"AGILENT TECHNOLOGIES INC" "A" 21907   .046915318  .02210494
"AGILENT TECHNOLOGIES INC" "A" 21909   .175849941  .22787777
"AGILENT TECHNOLOGIES INC" "A" 21910   -.03510825 -.07148113
"AGILENT TECHNOLOGIES INC" "A" 21913  -.398033247  -.3987391
"AGILENT TECHNOLOGIES INC" "A" 21914   .482921084   .4001452
"AGILENT TECHNOLOGIES INC" "A" 21916   .750205134   .2849918
"AGILENT TECHNOLOGIES INC" "A" 21917 -1.605584642   -.547133
"AGILENT TECHNOLOGIES INC" "A" 21920   .295613102  .14587303
"AGILENT TECHNOLOGIES INC" "A" 21921   .306531478  -.1008058
"AGILENT TECHNOLOGIES INC" "A" 21922   .987306065  .28085163
"AGILENT TECHNOLOGIES INC" "A" 21923   1.57122905   .4712778
"AGILENT TECHNOLOGIES INC" "A" 21924   .366678125 -.28940952
"AGILENT TECHNOLOGIES INC" "A" 21927  -.148418769   .6393859
"AGILENT TECHNOLOGIES INC" "A" 21928    .60599131  .16040236
"AGILENT TECHNOLOGIES INC" "A" 21929   .715990453  .15682487
"AGILENT TECHNOLOGIES INC" "A" 21930   .947867299   .9386929
"AGILENT TECHNOLOGIES INC" "A" 21931   .737759893   .2131232
"AGILENT TECHNOLOGIES INC" "A" 21935  -.565912117  -.4614247
"AGILENT TECHNOLOGIES INC" "A" 21936   .580292378 -.11654552
"AGILENT TECHNOLOGIES INC" "A" 21937 -1.176078997  .24640043
"AGILENT TECHNOLOGIES INC" "A" 21938  -.909397103 -1.0649707
"AGILENT TECHNOLOGIES INC" "A" 21941 -1.926127351  -1.586773
"AGILENT TECHNOLOGIES INC" "A" 21942   .716266174   .8967593
"AGILENT TECHNOLOGIES INC" "A" 21943   .068823125 -.33432925
"AGILENT TECHNOLOGIES INC" "A" 21944 -3.278312701  .21177804
"AGILENT TECHNOLOGIES INC" "A" 21945  -2.15690922 -1.9167613
"AGILENT TECHNOLOGIES INC" "A" 21948  -.496608527   .6194224
"AGILENT TECHNOLOGIES INC" "A" 21949  1.667681071   1.476584
"AGILENT TECHNOLOGIES INC" "A" 21950  1.688218391   1.521646
"AGILENT TECHNOLOGIES INC" "A" 21951  -.129518427 -.07071331
"AGILENT TECHNOLOGIES INC" "A" 21952 -1.945295921  -.8079903
"AGILENT TECHNOLOGIES INC" "A" 21955   1.51496934   .4244697
"AGILENT TECHNOLOGIES INC" "A" 21956   .781712661   .6504369
"AGILENT TECHNOLOGIES INC" "A" 21957   .399576919   .7073174
"AGILENT TECHNOLOGIES INC" "A" 21958   .046821959 -.14710107
"AGILENT TECHNOLOGIES INC" "A" 21959    .40950041  .09470734
"AGILENT TECHNOLOGIES INC" "A" 21963 -1.200186437   -.344234
"AGILENT TECHNOLOGIES INC" "A" 21964   .660455242  .35978335
"AGILENT TECHNOLOGIES INC" "A" 21965 -1.183362624  .07906973
"AGILENT TECHNOLOGIES INC" "A" 21966   .865544226  -.8942339
"AGILENT TECHNOLOGIES INC" "A" 21969  -5.37204655 -3.1063354
"AGILENT TECHNOLOGIES INC" "A" 21970 -3.167701863  -3.396188
"AGILENT TECHNOLOGIES INC" "A" 21971   .205259782 -1.0664127
"AGILENT TECHNOLOGIES INC" "A" 21972  -.870567149  -3.943557
"AGILENT TECHNOLOGIES INC" "A" 21973  -.464936071 -1.1772594
"AGILENT TECHNOLOGIES INC" "A" 21976  6.357856494  3.7973454
"AGILENT TECHNOLOGIES INC" "A" 21977  -2.01293156  -2.547469
"AGILENT TECHNOLOGIES INC" "A" 21978  5.017430279  3.7536044
"AGILENT TECHNOLOGIES INC" "A" 21979 -4.611736811  -3.740652
"AGILENT TECHNOLOGIES INC" "A" 21980 -2.361421825 -2.1566796
"AGILENT TECHNOLOGIES INC" "A" 21983 -9.941446029  -9.044309
"AGILENT TECHNOLOGIES INC" "A" 21984  3.053003534   4.911278
"AGILENT TECHNOLOGIES INC" "A" 21985 -5.582224661  -5.689369
"AGILENT TECHNOLOGIES INC" "A" 21986  -7.87332946  -10.40569
"AGILENT TECHNOLOGIES INC" "A" 21987  9.113844213   8.403405
"AGILENT TECHNOLOGIES INC" "A" 21990 -7.326589595  -12.70014
"AGILENT TECHNOLOGIES INC" "A" 21991  9.839388742   4.960319
"AGILENT TECHNOLOGIES INC" "A" 21992 -2.228847246  -7.672115
"AGILENT TECHNOLOGIES INC" "A" 21993  -4.51575432  2.1485755
"AGILENT TECHNOLOGIES INC" "A" 21994  1.064476886  -4.051433
"AGILENT TECHNOLOGIES INC" "A" 21997 -4.649413181  -3.539614
"AGILENT TECHNOLOGIES INC" "A" 21998  5.728262585  11.684687
"AGILENT TECHNOLOGIES INC" "A" 21999  2.985074627  3.1415126
"AGILENT TECHNOLOGIES INC" "A" 22000   6.84057971   6.068427
"AGILENT TECHNOLOGIES INC" "A" 22001 -3.811720022  -3.621305
"AGILENT TECHNOLOGIES INC" "A" 22004  2.735862361  2.1616588
"AGILENT TECHNOLOGIES INC" "A" 22005 -1.444887849  -1.671252
"AGILENT TECHNOLOGIES INC" "A" 22006 -3.769896677  -5.384763
"AGILENT TECHNOLOGIES INC" "A" 22007   4.88972722   1.314635
"AGILENT TECHNOLOGIES INC" "A" 22008 -2.586803154 -1.4252284
"AGILENT TECHNOLOGIES INC" "A" 22011   5.59500142   8.198161
"AGILENT TECHNOLOGIES INC" "A" 22012  -.443786982  1.2458416
"AGILENT TECHNOLOGIES INC" "A" 22013  3.593137917  4.7122025
"AGILENT TECHNOLOGIES INC" "A" 22014  2.138479593  2.5944736
"AGILENT TECHNOLOGIES INC" "A" 22018 -2.706498149  -2.386129
"AGILENT TECHNOLOGIES INC" "A" 22019  3.437869046   2.395324
"AGILENT TECHNOLOGIES INC" "A" 22020 -2.258023595  -3.538163
"AGILENT TECHNOLOGIES INC" "A" 22021  2.206359507   -.627517
"AGILENT TECHNOLOGIES INC" "A" 22022  1.015873016   4.486404
"AGILENT TECHNOLOGIES INC" "A" 22025 -2.740414833 -2.2300441
"AGILENT TECHNOLOGIES INC" "A" 22026 -4.678816079  -2.833861
"AGILENT TECHNOLOGIES INC" "A" 22027  1.925423729  1.8614105
"AGILENT TECHNOLOGIES INC" "A" 22028  -.106425436   .4441453
"AGILENT TECHNOLOGIES INC" "A" 22029   .878945266  1.3718454
end
format %td date1