The Delisting Bias in Crsp's NASDAQ Data and its Implications for Interpretation of the Size Effect

Posted: 17 Sep 1997

See all articles by Tyler Shumway

Tyler Shumway

University of Michigan at Ann Arbor, The Stephen M. Ross School of Business

Vincent A. Warther

Compass Lexecon

Date Written: August 29, 1997

Abstract

We investigate the bias in CRSP data due to missing returns for many of the stocks delisted from Nasdaq. We find that missing returns are far more common when the delisting is for reasons of poor performance, and we find the missing returns to be large and negative on average. This implies a bias for studies using Nasdaq data which is 4.7 times larger than the delisting bias previously documented for CRSP's NYSE/AMEX data. We estimate that using a corrected return of -55 percent wherever a performance-related delisting return is missing will correct the bias. We revisit previous work which finds a size effect in Nasdaq data and find that when the data are corrected for the delisting bias, the evidence for a size effect in Nasdaq data disappears.

JEL Classification: G12, G14

Suggested Citation

Shumway, Tyler and Warther, Vincent August, The Delisting Bias in Crsp's NASDAQ Data and its Implications for Interpretation of the Size Effect (August 29, 1997). Available at SSRN: https://ssrn.com/abstract=11150

Tyler Shumway (Contact Author)

University of Michigan at Ann Arbor, The Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-4129 (Phone)
734-936-0274 (Fax)

HOME PAGE: http://www.umich.edu/~shumway

Vincent August Warther

Compass Lexecon ( email )

332 South Michigan Avenue
Suite 1300
Chicago, IL 60604
United States

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