Negative Values in Compustat
Posted: 05 June 2015 01:00 PM   [ Ignore ]
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Hello all,

I am trying to replicate Pinkowitz and Williamson (2004) to find the dollar value of cash and I noticed that some of the variables have negative values that I could not find any explanation for them in WRDS.

for example why sometimes Cash and Marketable securities, Dividends, and R&D are negative? How should I treat them in my replication?

Thanks

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Posted: 05 June 2015 01:46 PM   [ Ignore ]   [ # 1 ]
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hi Moh,

I noticed the post on the Google group; either way is fine. I usually post questions on the Google group that I cannot immediately answer.

As for your question, I would be interested to know what other people say. My take on it is that measurement error is present in these datasets, and that we need to deal with it. Typically, the datasets are large, and some ‘weirdness’ doesn’t have much power to influence the results (winsorizing helps with that of course). The typical thing to do is to run some sensitivity tests such as does including/trimming/winsorizing etc influence the analyses. Usually it doesn’t, but if it does, you need to do some digging to see what is going on.

Best regards,

Joost

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Posted: 05 June 2015 01:52 PM   [ Ignore ]   [ # 2 ]
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Joost,

I think you are right. since I posted this question, I sorted my data based on these variables and there are only a handful of them which are negative ( i.e. only 5 for dividends). So as you said I can ignore them because trimming or windsorizing is going to take care of the problem.

Thanks

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Posted: 05 June 2015 01:54 PM   [ Ignore ]   [ # 3 ]
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Ok, sound good smile

Best,

Joost

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