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U.K. cross-sectional equity data: do not trust the dataset! The case for robust investability filters

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  • Rossi, Francesco

Abstract

We propose a novel approach to cross-sectional equities sample selection, derived from best market practice in index construction and focused on investability. Using the U.K. market as a template, we first demonstrate how the popular Datastream dataset is plagued by data deficiencies that would surely invalidate statistical inferences, and that are not addressed by commonly used filters. We show the benefits and need for a supplementary data source. We then develop robust investability filters to ensure statistical results from cross-sectional analysis are economically meaningful, an issue overlooked by most studies on cross-sectional risk pricing

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38303.

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Date of creation: Jul 2011
Date of revision: Nov 2011
Handle: RePEc:pra:mprapa:38303

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Keywords: cross-sectional equities; idiosyncratic risk; U.K. equities; asset pricing; investability; Datastream; Bloomberg; sample selection; turnover; volume; equities; equity;

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Cited by:
  1. Rossi, Francesco, 2011. "Risk components in UK cross-sectional equities: evidence of regimes and overstated parametric estimates," MPRA Paper 38682, University Library of Munich, Germany, revised 31 Mar 2012.

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