This repository contains replication files for the paper Directional Information in Equity Returns by Luca Del Viva, Carlo Sala and Andre B.M. Souza. The paper is available here.
Luca Del Viva, Carlo Sala, and Andre B.M. Souza.
This code requires Matlab, Stata, R, and access to a command prompt to run .sh files.
This code assumes there exists files named CRSP_Daily.dta and CRSP_Monthly.dta in data/inputs. These files should be downloaded from CRSP.
To construct the probability score, run the script ConstructProbScore.sh in the folder code.
Alternatively, you can run the scripts Preparing_Daily_Variables.do,Preparing_Weekly_Variables.do,Preparing_Monthly_Variables.do, Aggregate_Data.do, Create_ProbScore_OOS_Parallelized.R and Create_Main_Strategies.do.
Once the probability score is constructed, you can run the analysis to replicate Tables 1 and 2 in the paper by running the script RunAnalysis.sh.
Important Disclaimer: The data used in this study was downloaded from the following sources in April, 2023.
- CRSP_Daily from the WRDS (crsp_a_stock).
- CRSP_Monthly from the WRDS.
- Fama_French_Daily from Kenneth French's website
- Fama_French_Monthly from Kenneth French's website.
All_Factors.dtais an authors' compiled file. This file contains:- Excess Market returns, the risk free rate, SMB, HML, RMW, CMA, UMD factors from Kenneth French's website
- BAB, BAC, BAV, QMJ
- FMAX, PEAD, FIN, LIQ
- Q-Factors
- Staumbaugh Yuan Factors obtained from Robert Staumbaugh's website
- Idiosyncratic Vol (authors construction).