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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

Suggested Citation

  • Rossi, Francesco, 2011. "U.K. cross-sectional equity data: do not trust the dataset! The case for robust investability filters," MPRA Paper 38303, University Library of Munich, Germany, revised Nov 2011.
    • Handle: RePEc:pra:mprapa:38303
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    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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    More about this item

    Keywords

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

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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