I am trying to replicate the method of DeAngelo, DeAngelo and Stulz (2010) with regard to their definition of 'excess cash'. Khieu and Pyles (2012) describe the method as:
'For each sample period, firms are first sorted into three equal-size groups based on total book assets and then three equal-size groups based on the market-to-book ratio. Each observation is then put into one of the nine cross-sectional groups and the median cash level (divided by total noncash assets) of each two-digit SIC industry represents the normal level of cash for each firm within the group for that period. Excess cash is then calculated as actual cash holdings minus this median cash level. We label this variable Excess Cash DDS .'
Can anyone please tell me how to do that?
'For each sample period, firms are first sorted into three equal-size groups based on total book assets and then three equal-size groups based on the market-to-book ratio. Each observation is then put into one of the nine cross-sectional groups and the median cash level (divided by total noncash assets) of each two-digit SIC industry represents the normal level of cash for each firm within the group for that period. Excess cash is then calculated as actual cash holdings minus this median cash level. We label this variable Excess Cash DDS .'
Can anyone please tell me how to do that?
