Why Delisting Reasons Matter in Stock Return Analysis

Summary

This note explains why researchers building cross-sectional stock portfolios need to account for delistings. Omitting delisted firms or mishandling their final returns can distort the return history used in analysis. It points to CRSP’s monthly delisting file and its reason codes as a way to identify why a stock left the database and support an appropriate adjustment for the delisting month.

For Thomson Reuters Datastream, the response directs users with customer-zone access to its GCODE database, which includes a delisting type but offers limited detail. It also points readers to the product guide for information about the field. The note gives no specific adjustment rules, examples, or comparison of data coverage across vendors, so researchers still need to check each source’s definitions and determine how its classifications fit their return methodology.

Key ideas

• Delisted stocks need appropriate treatment in cross-sectional return analysis.
• CRSP’s monthly delisting file records reason codes that can inform adjustments to delisting-month returns.
• Thomson Reuters offers a delisting type through its GCODE database, though the classification is described as limited in detail.
• Researchers should check source definitions before applying delisting adjustments.

Tags

# Data: Why is a firm stock delisted?


# Data: Why is a firm stock delisted?












Shumway (1997) highlights that stock returns in cross-sectional portfolio analysis have to be adjusted for firm delistings.

The CRSP database maintains a monthly delisting file (msedelist) with further information on why a stock is delisted in the field DLSTCD. This field decodes a lot of several delisting reasons (see here) which are needed for an appropriate adjustment of this stocks return in the delisting month.

Is there an equivalent to CRSPs DLSTCD field on why a stock is delisted available in Thomson Reuters Datastream or any other data source?

## Answer by Peter (score 1, accepted)

https://quant.stackexchange.com/a/44521

If you have access to Thomson Reuters customer zone, log in and look for GCODE Database. There is a type for delisting, but not very granular.

If you don't have access to customer zone, see user guide, page 137: https://developers.thomsonreuters.com/sites/default/files/DSS_11_2_User_Guide.pdf

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.