Handling Missing Compustat and CRSP Values in Accounting Measures
Summary
The document addresses whether missing accounting observations in Compustat or CRSP should be replaced with zero or removed from a dataset. Its guidance is to use judgment and be cautious: zero can be nonsensical for some fields, while alternative calculations or zero imputation may be appropriate in specific cases. The right treatment depends on what the missing field represents and how the measure is defined.
It illustrates this with Fama and French's book-equity construction. When preferred-stock values are needed, the example uses redemption value first, then liquidation value, then par value; it also describes fallback measures for stockholders' equity when the preferred source is unavailable. Deferred taxes and investment tax credit are treated as zero when missing in the illustrated calculation. This is a field-specific research convention, not a general rule for all missing financial data. Researchers should document assumptions and examine how choices affect their sample and results.
Key ideas
- Missing accounting values should not automatically be replaced with zero or deleted.
- The appropriate treatment depends on the variable's meaning and the calculation being performed.
- The book-equity example uses a priority order for alternative preferred-stock values.
- The example treats deferred taxes and investment tax credit as zero when unavailable.
- Field-specific conventions should not be generalized to all missing data.
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# how to treat NA values in Compustat and CRSP # how to treat NA values in Compustat and CRSP In some years, some accounting values of some companies are missing in Compustat and CRSP. How do I treat those missing values ? Should I replace those with zeros or just simply delete years in which missing values are represented ? For example: ``` gvkey datadate fyear current aseet Total Asset Current Liability 1010 19951231 1995 2015.8 1010 19961231 1996 2218.6 1010 19971231 1997 3181.3 ``` ## Answer by Matthew Gunn (score 6, accepted) https://quant.stackexchange.com/a/40144 You're going to have to use judgement. There are situations where treating missing values as 0 would be insane. In general, I'd be immensely cautious. On the other hand, there are situations where it's reasonable to attempt an alternative calculation and situations where using 0 may be reasonable. A nice example can be found in Kenneth French's description of how Fama and French calculate book equity: > Book Equity ... is the book value of stockholders’ equity, plus balance sheet deferred taxes and investment tax credit (if available), minus the book value of preferred stock. Depending on availability, we use the redemption, liquidation, or par value (in that order) to estimate the book value of preferred stock. Stockholders’ equity is the value reported by Moody’s or Compustat, if it is available. If not, we measure stockholders’ equity as the book value of common equity plus the par value of preferred stock, or the book value of assets minus total liabilities (in that order). See Davis, Fama, and French, 2000, “Characteristics, Covariances, and Average Returns: 1929-1997,” Journal of Finance, for more details. Following Fama and French, you can take a first crack at calculating book equity using the SQL code: `SEQ - COALESCE(PSTKRV, PSTKL, PSTK, 0) + COALESCE(TXDITC,0) as be` The COALESCE function returns the first non null result in the list. For the book value of preferred stock, try PSTKRV first, then PSTKL, then PSTK. Treat the tax deferred assets plus investment tax credit (TXDITC) as zero if it's unavailable. The code here written by Palacios from CRSP and Vora from Penn State does what I described above.
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