options nocenter ls=80;

libname temp 'd:\empirical methods\';
filename tempdir 'd:\empirical methods\';

*Read in data created from Ken French's website for the 10 size portfolios;
data ret10;
  informat date yymmn6.;
  format date yymmn6.;
  infile tempdir(sizedecilereturns.csv) missover firstobs=3 dlm=',';
  input date r1-r10;
  year=year(date);
  month=month(date);
proc sort;
  by date;
proc print data=ret10 (obs=20);
proc means;
run;

*Read in the Fama French Factors from Ken French's website;
data fffact;
  informat date yymmn6.;
  format date yymmn6.;
  infile tempdir(F-F_Research_Data_Factors.txt) missover firstobs=5;
  input date mkt smb hml rf;
  lmkt=lag(mkt);
proc sort;
  by date;
proc print data=fffact (obs=100);
proc means;
run;

data all;
  merge ret10 fffact;
  by date;
  r1=r1-rf;
  r2=r2-rf;
  r3=r3-rf;
  r4=r4-rf;
  r5=r5-rf;
  r6=r6-rf;
  r7=r7-rf;
  r8=r8-rf;
  r9=r9-rf;
  r10=r10-rf;
  if year<1963 then delete;
proc sort;
  by year month;
proc means;
run;

*Read in the macro variables default spread, dividend yield, and 3 month tbill yield;
data macro;
  set temp.macro;
proc sort;
  by year month;
run;
data macro;
  set macro;
  ldef=lag(def);
  ldiv=lag(div);
  lyld3=lag(yld3);
run;

data all;
  merge all (in=A) macro (in=B);
  by year month;
  if A and B;
proc means;
run;

*Estimate forecasting regressions Table 2;
proc reg data=all;
  model r1=ldef ldiv lyld3;
  model r2=ldef ldiv lyld3;
  model r3=ldef ldiv lyld3;
  model r4=ldef ldiv lyld3;
  model r5=ldef ldiv lyld3;
  model r6=ldef ldiv lyld3;
  model r7=ldef ldiv lyld3;
  model r8=ldef ldiv lyld3;
  model r9=ldef ldiv lyld3;
  model r10=ldef ldiv lyld3;
run;

*Single portfolio tests Table 5;
proc model data=all;
  parms d0-d3 m0-m3 lambda;
  exogenous r10 mkt;
  instruments ldef lyld3 ldiv;
  eq.one=r10-(d0+d1*lyld3+d2*ldiv+d3*ldef);
  eq.two=mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef);
  eq.three=r10-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r10-(d0+d1*lyld3+d2*ldiv+d3*ldef));
  fit one two three /gmm;
run;

*Multi-portfolio tests Table 6--Overidentifying restrictions test;
proc model data=all;
  parms d10-d13 d20-d23 d30-d33 d40-d43 d50-d53 d60-d63 d70-d73
        d80-d83 d90-d93 d100-d103 m0-m3 lambda;
  exogenous r1-r10 mkt;
  instruments ldef lyld3 ldiv;
  eq.one=r1-(d10+d11*lyld3+d12*ldiv+d13*ldef);
  eq.two=r2-(d20+d21*lyld3+d22*ldiv+d23*ldef);
  eq.three=r3-(d30+d31*lyld3+d32*ldiv+d33*ldef);
  eq.four=r4-(d40+d41*lyld3+d42*ldiv+d43*ldef);
  eq.five=r5-(d50+d51*lyld3+d52*ldiv+d53*ldef);
  eq.six=r6-(d60+d61*lyld3+d62*ldiv+d63*ldef);
  eq.seven=r7-(d70+d71*lyld3+d72*ldiv+d73*ldef);
  eq.eight=r8-(d80+d81*lyld3+d82*ldiv+d83*ldef);
  eq.nine=r9-(d90+d91*lyld3+d92*ldiv+d93*ldef);
  eq.ten=r10-(d100+d101*lyld3+d102*ldiv+d103*ldef);
  eq.eleven=mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef);
  eq.twelve=r1-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r1-(d10+d11*lyld3+d12*ldiv+d13*ldef));
  eq.thirteen=r2-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r2-(d20+d21*lyld3+d22*ldiv+d23*ldef));
  eq.fourteen=r3-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r3-(d30+d31*lyld3+d32*ldiv+d33*ldef));
  eq.fifteen=r4-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r4-(d40+d41*lyld3+d42*ldiv+d43*ldef));
  eq.sixteen=r5-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r5-(d50+d51*lyld3+d52*ldiv+d53*ldef));
  eq.seventeen=r6-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r6-(d60+d61*lyld3+d62*ldiv+d63*ldef));
  eq.eighteen=r7-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r7-(d70+d71*lyld3+d72*ldiv+d73*ldef));
  eq.nineteen=r8-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r8-(d80+d81*lyld3+d82*ldiv+d83*ldef));
  eq.twenty=r9-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r9-(d90+d91*lyld3+d92*ldiv+d93*ldef));
  eq.twentyone=r10-lambda*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r10-(d100+d101*lyld3+d102*ldiv+d103*ldef));

  fit one two three four five six seven eight nine ten eleven twelve thirteen
      fourteen fifteen sixteen seventeen eighteen nineteen twenty twentyone/gmm kernel=(bartlett,4,0);;
run;

*Table 6--Wald Test;
proc model data=all;
  parms d10-d13 d20-d23 d30-d33 d40-d43 d50-d53 d60-d63 d70-d73
        d80-d83 d90-d93 d100-d103 m0-m3 l1-l10;
  exogenous r1-r10 mkt;
  instruments ldef lyld3 ldiv;
  eq.one=r1-(d10+d11*lyld3+d12*ldiv+d13*ldef);
  eq.two=r2-(d20+d21*lyld3+d22*ldiv+d23*ldef);
  eq.three=r3-(d30+d31*lyld3+d32*ldiv+d33*ldef);
  eq.four=r4-(d40+d41*lyld3+d42*ldiv+d43*ldef);
  eq.five=r5-(d50+d51*lyld3+d52*ldiv+d53*ldef);
  eq.six=r6-(d60+d61*lyld3+d62*ldiv+d63*ldef);
  eq.seven=r7-(d70+d71*lyld3+d72*ldiv+d73*ldef);
  eq.eight=r8-(d80+d81*lyld3+d82*ldiv+d83*ldef);
  eq.nine=r9-(d90+d91*lyld3+d92*ldiv+d93*ldef);
  eq.ten=r10-(d100+d101*lyld3+d102*ldiv+d103*ldef);
  eq.eleven=mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef);
  eq.twelve=r1-l1*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r1-(d10+d11*lyld3+d12*ldiv+d13*ldef));
  eq.thirteen=r2-l2*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r2-(d20+d21*lyld3+d22*ldiv+d23*ldef));
  eq.fourteen=r3-l3*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r3-(d30+d31*lyld3+d32*ldiv+d33*ldef));
  eq.fifteen=r4-l4*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r4-(d40+d41*lyld3+d42*ldiv+d43*ldef));
  eq.sixteen=r5-l5*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r5-(d50+d51*lyld3+d52*ldiv+d53*ldef));
  eq.seventeen=r6-l6*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r6-(d60+d61*lyld3+d62*ldiv+d63*ldef));
  eq.eighteen=r7-l7*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r7-(d70+d71*lyld3+d72*ldiv+d73*ldef));
  eq.nineteen=r8-l8*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r8-(d80+d81*lyld3+d82*ldiv+d83*ldef));
  eq.twenty=r9-l9*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r9-(d90+d91*lyld3+d92*ldiv+d93*ldef));
  eq.twentyone=r10-l10*(mkt-(m0+m1*lyld3+m2*ldiv+m3*ldef))*(r10-(d100+d101*lyld3+d102*ldiv+d103*ldef));

  fit one two three four five six seven eight nine ten eleven twelve thirteen
      fourteen fifteen sixteen seventeen eighteen nineteen twenty twentyone/gmm kernel=(bartlett,4,0);
  test l1, l2, l3, l4, l5, l6, l7, l8, l9, l10, /wald;
run;