- 2. Filter non-common equity securities using security names: Restricting TYP=EQ is not adequate to exclude all non-common equity securities. Datastream tracks security type information predominantly through the addition of text in the security’s name files. Following Griffin Kelly and Nardari (2010), we apply company name (DSSECNAME) filters to exclude non-common equity firms: We apply both the generic and the country-specific name filters to identify and exclude preferred stock, American Depositary Receipts (ADRs), mutual funds, index funds, warrants, investment trusts, Real Estate Investment Trusts (REITs) and other forms of non-common equity. These filters are listed in Table A1.
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- 3. Filter data errors in returns: We apply several screening procedures for monthly returns as suggested by Ince and Porter (2003) and others. First, any return above 300% that is reversed within one month is set to missing. Specifically, if Rt or Rt−1 is greater than 300%, and (1 + Rt)(1 + Rt−1) − 1 < 50%, then both Rt and Rt−1 are set to missing. Second, in order to exclude remaining outliers in returns that cannot be identifiable as stock splits or mergers, we treat as missing the monthly returns that fall out of the 0.1% and 99.9% percentile ranges in each country. We also eliminate all monthly observations for delisted stocks from the end of the sample period to the first non-zero return date (based on local currency) since Datastream keeps padding the last available data after the delisting date. We use exchange rate data from Bloomberg to convert all returns into USD-denominated valuers.
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- Also reported is the long-short alpha for the composite mispricing measure that averages a stock’s ranking percentiles across anomalies. Panel A reports the estimated alphas, and Panel B reports the corresponding t-statistics based on the heteroskedasticity-consistent standard errors of White (1980).
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- Also reported is the long-short return spread for the composite mispricing measure that averages a stock’s ranking percentiles across anomalies. Panel A reports the estimated return spread, and Panel B reports the corresponding t-statistics based on the heteroskedasticity-consistent standard errors of White (1980).
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- Anomaly 8: Gross profitability (GP) Gross profit is sales minus the cost of goods sold, scaled by total assets. We measure gross profitability as total revenue (REVT, WC01001) minus the cost of goods sold (COGS, WC01051), divided by current total assets (AT, WC02999). If current total assets, total revenue, or cost of goods sold is negative, then GP is set to missing. Following Sun, Wei and Xie (2014), we exclude firm-year observations with GP less than −100% or greater than 100%. GP in fiscal year t is computed as: GPt = REV Tt − COGSt ATt Anomaly 9: Return on assets (ROA) ROA is WorldScope item WC08326.
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- Appendix A. Data Description This appendix provides details of data sources and methods. Section A1 describes the sources and screening procedures for our data. We apply filters commonly used by previous studies to clean the data and construct the nine individual anomalies in each country. Section A2 describes the construction of the anomaly measures and the corresponding mispricing scores, with the latter following the method in Stambaugh Yu and Yuan (2015) for U.S. anomalies.
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- Table B1 Alphas for Anomaly Long-Short Returns (Value-Weighted Portfolios) The table reports the alphas (in percent) of the monthly return spread between the portfolios containing stocks in the highest and lowest deciles of the ranking variable. Alpha is the estimated intercept in a regression of the spread return on the country’s market, size, and book-to-market factors. The long- and short-leg portfolios are value weighted. The “average†column reports the alpha of an equally weighted cross-country combination of the long-short spreads. Also reported is the long-short alpha for the composite mispricing measure that averages a stock’s ranking percentiles across anomalies. Panel A reports the estimated alphas, and Panel B reports the corresponding t-statistics based on the heteroskedasticity-consistent standard errors of White (1980).
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- The “average†column reports the alpha of an equally weighted cross-country combination of the long-short spreads. Also reported is the long-short alpha for the composite mispricing measure that averages a stock’s ranking percentiles across anomalies. Panel A reports the estimated alphas, and Panel B reports the corresponding t-statistics based on the heteroskedasticity-consistent standard errors of White (1980).
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