Missing Financial Data

129 Pages Posted: 13 May 2022 Last revised: 22 Jan 2024

See all articles by Svetlana Bryzgalova

Svetlana Bryzgalova

London Business School - Department of Finance; Centre for Economic Policy Research (CEPR)

Sven Lerner

Stanford University - Institute for Computational and Mathematical Engineering

Martin Lettau

University of California - Haas School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Markus Pelger

Stanford University - Department of Management Science & Engineering

Date Written: May 11, 2022

Abstract

We document the widespread nature and structure of missing observations of firm fundamentals and show how to systematically deal with them. Missing financial data affects over 70% of firms that represent about half of the total market cap. Firm fundamentals have complex systematic missing patterns, invalidating traditional ad-hoc approaches to imputation. We propose a novel imputation method to obtain a fully observed panel of firm fundamentals, that exploits both time-series and cross-sectional dependency of data to impute their missing values, and allows for general systematic patterns of missingness. We document important implications for risk premia estimates, cross-sectional anomalies, and portfolio construction.

Keywords: Missing data, firm characteristics, PCA, factor model, big data, asset pricing

JEL Classification: C14, C38, C55, G12

Suggested Citation

Bryzgalova, Svetlana and Lerner, Sven and Lettau, Martin and Pelger, Markus, Missing Financial Data (May 11, 2022). Available at SSRN: https://ssrn.com/abstract=4106794 or http://dx.doi.org/10.2139/ssrn.4106794

Svetlana Bryzgalova

London Business School - Department of Finance ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Sven Lerner

Stanford University - Institute for Computational and Mathematical Engineering ( email )

Stanford, CA 94305
United States

Martin Lettau

University of California - Haas School of Business ( email )

Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
5106436349 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu/lettau/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Markus Pelger (Contact Author)

Stanford University - Department of Management Science & Engineering ( email )

473 Via Ortega
Stanford, CA 94305-9025
United States

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