Individual Equity Return Data from Thomson Datastream: Handle with Care!

Abstract

We compare individual equity return data from Thomson Datastream (TDS) for one large national equity market, the United States, to the source most often used by academics, the Center for Research in Security Prices (CRSP) for the period 1975-2002. Our purpose is not to advocate for the use of a particular source of U.S. equity data but to evaluate the suitability of TDS for use in studies involving large numbers of individual equities in markets outside the U.S. We discover important issues of coverage, classification, and data integrity and find that naive use of TDS data can have a large impact on economic inferences, particularly earlier in the period of coverage and among smaller stocks. We show that after careful screening of the TDS data that although differences still remain, inferences drawn from TDS data are similar to those drawn from CRSP. We also apply our screens to a sample of four European equity markets and show that screening the data has a measurable impact on the time series of country portfolio returns.