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The Delisting Bias in CRSP's Nasdaq Data and Its Implications for the Size Effect

We investigate the bias in CRSP's Nasdaq data due to missing returns for delisted stocks. We find that the missing returns are large and negative on average, and that delisted stocks experience a substantial decrease in liquidity. We estimate that using a corrected return of -55 percent for mis...

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Published in:	The Journal of finance (New York) 1999-12, Vol.54 (6), p.2361-2379
Main Authors:	Shumway, Tyler, Warther, Vincent A.
Format:	Article
Language:	English
Subjects:	Arithmetic mean Bias Common stock Estimation bias Financial portfolios Impact analysis Nasdaq Composite Index NASDAQ trading Research biases Security prices Shorter Papers Statistical analysis Stock exchanges Stock market delistings Stock prices Studies
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description	We investigate the bias in CRSP's Nasdaq data due to missing returns for delisted stocks. We find that the missing returns are large and negative on average, and that delisted stocks experience a substantial decrease in liquidity. We estimate that using a corrected return of -55 percent for missing performance-related delisting returns corrects the bias. We revisit previous work which finds a size effect among Nasdaq stocks. After correcting for the delisting bias, there is no evidence that there ever was a size effect on Nasdaq. Our results are inconsistent with most risk-based explanations of the size effect.
doi_str_mv	10.1111/0022-1082.00192
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source	International Bibliography of the Social Sciences (IBSS); Wiley-Blackwell Read & Publish Collection; JSTOR
subjects	Arithmetic mean Bias Common stock Estimation bias Financial portfolios Impact analysis Nasdaq Composite Index NASDAQ trading Research biases Security prices Shorter Papers Statistical analysis Stock exchanges Stock market delistings Stock prices Studies
title	The Delisting Bias in CRSP's Nasdaq Data and Its Implications for the Size Effect
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