Computing Equity Value with COMPUSTAT funda and gfunda
Posted: 10 September 2015 05:27 PM   [ Ignore ]
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Hi everyone,

WRDS newbie here - I want to calculate Equity Value for companies in Compustat. In funda there is MKVALT (Market Value of Common Equity), which is a great start. But from that point on I’m having trouble. What I’m wondering is:

- Is there no MKVALT or equivalent in gfunda? Can it be computed somehow?
- How would I find “in-the-money” options, warrants and convertible securities?

Thanks in advance for any hints & tips!

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Posted: 10 September 2015 08:00 PM   [ Ignore ]   [ # 1 ]
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hi,

To get market cap for firms in Compustat Global, you can match on gvkey with Security Daily to get #shares and stock price for datadate (end of year).

Do you need the options info for officiers/directors/insiders? Or for the options market? (outsiders). Execucomp would have some of that data for insiders of US companies. For outsiders, or insiders for other countries I don’t know..

Hope this helps,

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Posted: 11 September 2015 05:26 AM   [ Ignore ]   [ # 2 ]
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Yes, insider options is what I mean, sorry. Thanks for the pointers!

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Posted: 11 September 2015 07:08 AM   [ Ignore ]   [ # 3 ]
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ok,

Insider ownership is reported in forms 4 and 5 (or 3, 4, 5, not sure). I believe Thomson-Reuters sells a dataset with that data.

Best regards,

Joost

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Posted: 16 September 2015 03:37 AM   [ Ignore ]   [ # 4 ]
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Thanks Joost Impink

To calculate Market Value for the population in Compustat Global I’ve ended up using:

CSHOI (from gfunda) * PRCCD (from Compustat Global Securities Daily)

I have two points I’m unsure about and that I would greatly appreciate your thoughts on:

1. I’m unclear about whether this accounts for the fact that some companies offer multiple classes of common shares.
2. Is the above calculation comparable to the MKVALT variable or CHSO * PRCC_F in Compustat North America?

Best regards

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Posted: 16 September 2015 10:58 AM   [ Ignore ]   [ # 5 ]
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hi,

Yes, multiplying #shares with price per share gives market cap.

I haven’t used G_Funda much; how does CSHOI (Com Shares Outstanding - Issue) compare with cshoc (shares outstanding) in SECD (https://wrds-web.wharton.upenn.edu/wrds/tools/variable.cfm?library_id=7&file_id=52043) ?

I would say this gives you market cap of common shares, and does not take other classes into account.

Best regards,

Joost

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Posted: 16 September 2015 01:19 PM   [ Ignore ]   [ # 6 ]
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CSHOI and CSHOC are mostly identical or similar enough, however CSHOC seems more volatile, e.g. for GVKEY 101241, DATADATE 31/12/2014 it is 0.05m whereas CSHOI returns ca. 87m, as does CSHOC in previous years. There are lots of cases like this.

Comparing item definitions doesn’t yield any meaningful results since the description of CSHOC is fairly vague. I think I’ll keep using CSHOI, don’t you think?

What still concerns me is this: Where a company such as Berkshire Hathaway (http://www.berkshirehathaway.com/2001ar/commonstock.html) has multiple classes of Common Shares (Class A and Class B), is this taken into account when calculating CSHOI * PRCCD ?

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Posted: 16 September 2015 01:29 PM   [ Ignore ]   [ # 7 ]
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Without having seen the data, I would expect that stock splits (that affect both stock price as well as #shares) would be dealt with more consistency when both price and #shares come from the same dataset. (I.e., there is a risk that #shares from Compustat is not in sync with stock splits as in SECD). But I don’t know if that is an issue.

If you inspected the data and #shares looks more realistic in Funda, then that would be the way to go smile. (You could also compute market cap both ways and include some sensitivity tests).

For US data I am fairly certain that cases like Berkshire Hathaway with multiple shares have separate entries in CRSP, where one type of class is marked as ‘primary’ (usually the class A common shares). For international firms in G_Funda/SECD I don’t know.

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Joost

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