Journal Article10.1093/rfs/hhae036
Missing Financial Data
Svetlana Bryzgalova,Sven Lerner,Martin Lettau,Markus Pelger +3 more
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TL;DR: This study documents widespread missing financial data in over 70% of firms, affecting half of the market cap, and proposes a novel imputation method to handle systematic missing patterns, with implications for risk premiums, anomalies, and portfolio construction.
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Abstract: Abstract We document the widespread nature and structure of missing observations of firm fundamentals and show how to systematically handle them. Missing financial data affects more than 70% of firms that represent about half of the total market cap. Firm fundamentals have complex systematic missing patterns, invalidating traditional approaches to imputation. We propose a novel imputation method to obtain a fully observed panel of firm fundamentals that exploits both time-series and cross-sectional dependency of data to impute missing values and allows for general systematic patterns of missingness. We document important implications for risk premiums estimates, cross-sectional anomalies, and portfolio construction. (JEL C14, C38, C55, G12)
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Citations
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