Wrong “Price - Fiscal Year Close” in Compustat North America Data and Ratios report?
Posted: 03 June 2014 05:51 PM   [ Ignore ]
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Hi,

I am new to WRDS.

I extracted fundamental data, as well as stock prices and total returns from WRDS using the Compustat > Tools > Data and Ratios (XLS) menu. However, I see some seemingly incorrect data in the “Price - Fiscal Year Close”.

For instance, for Expedia (EXPE), the value of “Common Stock Return - Fiscal Year” is incorrect for the year 2011. Compustat returns (29.02 + 0.56) / 50.18 - 1 = -41.1%, whereas it should be (29.02 + 0.56) / (50.18 / 2) - 1 = +17.9% as per CRSP.

The problem comes from the value of “Price - Fiscal Year Close” as of 2010 (50.18) which is not adjusted for the stock split that occurred in December 2011.

Could you please confirm whether Compustat is incorrect? If so, what can I do about it? How to effectively correct all the “Price - Fiscal Year Close” values? Where to get the information from?

Thank you very much for your help.

Caezar

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Posted: 04 June 2014 07:35 AM   [ Ignore ]   [ # 1 ]
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hi Caezar,

Good point - the stock price (prcc_f) cannot be used to compute returns by itself. As you noticed, it is not adjusted for stock splits/stock dividends. You will need to combine prcc_f with adjex_f (Cumulative Adjustment Factor by Ex-Date - Fiscal).

In the case of Expedia, adjex_f is 1.00 for 2011 (and 2012), and 0.50 for the years before.

I believe that overall it is better to use CRSP to compute returns. The daily/monthly return datasets are corrected for stock splits, dividends etc.

best regards,

Joost

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Posted: 04 June 2014 08:18 AM   [ Ignore ]   [ # 2 ]
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Joost,

I thank you very much for your reply. I have finished to compare returns from Compustat to those from CRSP. Rather than merging the two datasets and having to recompute all the ratios from Compustat using CRSP’s price information, I decided to only keep the records from Compustat where the return from the two databases are consistent (allowing small differences).

This forces me to throw some records (around 10%), but it saves me a lot of time merging the two datasets.

Caezar

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Posted: 04 June 2014 08:24 AM   [ Ignore ]   [ # 3 ]
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Hi Caezar,

Ok; dropping the observations with a (reverse) stock split probably influences the make-up of your dataset though (the obs you are dropping are not ‘random’).

best regards,

Joost

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Posted: 04 June 2014 09:37 AM   [ Ignore ]   [ # 4 ]
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Joost, you are right. I will need to add these records back later. But I am eager to start writing code for my model (at least to build “the infrastructure”). When my program is ready and it is time to do actual runs, I will construct a comprehensive dataset.

Caezar

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Posted: 04 June 2014 12:32 PM   [ Ignore ]   [ # 5 ]
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hi Caezar,

Sounds like a good plan smile

best regards,

Joost

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