how to calculate Tobin's Q

[Amit Sarker]

Hi,

I am struggling to calculate market to book ratio (Tobin's Q) from Compustat. I need this ratio for all the UK companies of last 15 year and I am not sure about which variables and method I should use for that. Can you please help me? I am hoping that someone else has already used Compustat to find it.

Thanks

[joost impink]

hi,

see variable lists

Compustat Global Annual: https://wrds-web.wharton.upenn.edu/wrds/tools/variable.cfm?library_id=7&file_id=54650

Compustat Merged Global Security Daily File (G_SECD) : https://wrds-web.wharton.upenn.edu/wrds/tools/variable.cfm?library_id=7&file_id=52043

Use 'gvkey' (Compustat firm identifier) 'at' (Assets - Total), 'ceq' (book value of equity), 'datadate' (end of year date) from the first table, and match on gvkey and datadate on securities table to get cshoc (shares outstanding) and prccd (end of day stock price). The 'simple' version of Tobin's q is the market value of assets / book value of assets => q = (cshoc * prccd - ceq + at)/at (please doublecheck formula; it assumes that the market value of liabilities is equal to the book value of liabilities).

Hope this helps,

Joost

[Amit Sarker]

Thanks a lot! It was really helpful.

Just wondering how to match the data from these two sets. For CEQ I am getting the year end information but for cshoc and prccd I find daily data, although I just need the year end position. Can I do it using Compustat?

Sorry to bother you again.

Best

[joost impink]

hi,

It makes sense to use datadate (which is the end of fiscal year) as the date on which to collect the stock price (i.e. match both datasets on gvkey and datadate).

Compustat is just the name of the data and cannot execute code (joins). Use SSH on WRDS, rsubmit in SAS, or download the datasets and join with other software like Stata, SPSS, etc. (whatever works for you).

Best,

Joost

[joost impink]

hi Julien,

For the ones with missing values, can you find it on g_secd (the security dataset)? Also, it seems that non-US studies often use Datastream; if you happen to have access it could be worthwhile to compare data coverage/availability.

Best Regards,

Joost

On Thursday, October 29, 2015 at 8:18:26 PM UTC-4, Julien Bei wrote:

Hello Joost,

I found cshoc  and prccd are not available at the end of fiscal year(datadate in fundamental annual table) for many global firms.  Do you know how to handle this issue? Thank you!

Julien  

[jcn...@xs4all.nl]

Hi Joost,

I'm also using Tobin's Q for my master thesis. I tried to merge the Compustat Global - Fundamentals Annual database with CRSP/Compustat Merged Database - Security Daily database like you suggested, but I ran into a problem.

The Security Daily database adds ''Issue ID -Daily Price'' as a variable (with outputs like 01W and 092W), I'm not sure what they mean with that. When I merge the databases I get for each end of the year date multiple price - close -daily (because for every Issue ID they give several prccd). Do you know how I can get a single price - close - daily result for the end of year dates?

Best regards,

Jordan

Op vrijdag 30 oktober 2015 02:30:11 UTC+1 schreef joost impink: