Articlegreen1999

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

545 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

ABSTRACT 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.

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References

1992The Cross-Section of Expected Stock Returns 1981The relationship between return and market value of common stocks 1995Size and Book-to-Market Factors in Earnings and Returns 1981Misspecification of capital asset pricing 1990Data-Snooping Biases in Tests of Financial Asset Pricing Models 1997The Delisting Bias in CRSP Data 1998Is the Risk of Bankruptcy a Systematic Risk?1991Structural and Return Characteristics of Small and Large Firms

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2023Going digital: implications for firm value and performance 2006Empirical Evidence on Capital Investment, Growth Options, and Security Returns 2011Financial Distress and the Cross‐section of Equity Returns 2011Is size dead? A review of the size effect in equity returns 2018The History of the Cross-Section of Stock Returns 2005In Search of Distress Risk

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