Abstract
Background: As financial professionals including policy-makers tend to base decisions on research performed using large machine-readable financial databases, the accuracy of the financial data provided by database companies has a direct impact on the quality of their decisions. Objectives: The objective of this study was to examine data errors in the DataGuide and KisValue databases which are both primary sources of stock prices and return data for Korea Exchange securities in Korea. This article also discussed the methodological implications of erroneous data on monthly stock returns in empirical studies on Korean financial markets. Methods: A cross-checking technique was used in this study. Results: The results suggest that there are material discrepancies between the DataGuide and KisValue databases in monthly stock returns, most of which are attributable to the mishandling of split events and of missing values. The results also indicate that DataGuide provides a more reliable service than KisValue in terms of monthly stock returns. Conclusion: The results show that extreme monthly returns resulting from serious data errors in the DataGuide and KisValue databases may be enough to sharply change the properties of monthly stock return distributions and to over- or underestimate long-term abnormal stock returns.
Highlights
This article examines data errors in the DataGuide and KisValue databases, which are both primary sources of the stock prices and return data for Korea Exchange (KRX) securities in Korea, by using a cross-checking technique
We examined data errors in the DataGuide and KisValue databases, which are commonly used by financial professionals in Korea, by using cross-checking
We focused mainly on comparing monthly stock returns for 729 KRX listed securities available in both the DataGuide and KisValue databases covering 15 years from January 2000 to December 2014
Summary
As financial professionals including policy-makers tend to base decisions on research performed using large machine-readable financial databases, the accuracy of the financial data provided by database companies has a direct impact on the quality of their decisions
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