CRSP CELEBRATES

ABOUT CRSP

As an affiliate of The University of Chicago Booth School of Business, the Center for Research in Security Prices LLC (CRSP) has been driving financial innovation since its founding in 1960. CRSP provides market participants with the world’s first and most comprehensive resource for historical security prices and returns information, offering data of the highest integrity and transparency to ensure the strongest foundation for economic forecasting, stock market research and financial analysis conducted by academic organizations, investment banks, brokerage firms, corporations and government agencies. CRSP data has led to the transformation of the world of finance, illuminating the benefits of investments in equities, providing understanding of factors such as value, size and momentum, exploring the benefits of passive investing vs. active management, and contributing to the ongoing improvement of investor outcomes and the development of the modern financial ecosystem and investment industry.

10 YEARS OF CRSP MARKET INDEXES

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ABOUT CRSP MARKET INDEXES

CRSP Market Indexes blend the advancements
in academic research with industry practice under
the premise that an index must reflect the way that
money managers actually invest.

CRSP has been producing indexes since 1966, helping
academics and practitioners understand and research the
trends in the financial markets. Drawing on its expertise,
CRSP designed CRSP Market Indexes to be efficient,
transparent and representative benchmarks for
corresponding market segments.
 

Launched in 2011, CRSP Market indexes are modern
benchmarks that are suitable for tracking different
segments of the US market, including Large and
Small capitalization stocks, Value and Growth
styles, as well as Industry Sectors.

CRSP Market have over $1.5 trillion dollars of tracking assets.

ADVANCING INNOVATION

CRSP draws on its academic and industry expertise to ensure that its investable indexes incorporate the most modern and forward-thinking approaches. Among the many results of this process are index innovations intended to ensure the most comprehensive and inclusive methodology for index composition, including the employment of our Cumulative Market Capitalization metrics and Multi-Factor Style models.

CUMULATIVE MARKET CAPITALIZATION FOR CAP BREAKPOINTS

CRSP utilizes its cumulative market capitalization method to construct and define breakpoints for cap-based indexes. Cumulative capitalization method, unlike a more basic fixed-count approach (100 stocks, 500s stocks, etc.), delivers consistent exposure to “size” without any sensitivity to a specific time or market. Exhibit [#1] shows how the percent of market capitalization for fixed-count portfolios fluctuate and, as a result, the amount of market risk in a portfolio with fixed number of stocks also varies over time. Furthermore, as seen from the chart, a fixed-count portfolio accounts for a larger fraction of total market risk today than it did in the past. CRSP believes that fixed-count benchmarks are not ideal for performance evaluation or for the construction of “policy portfolios” in asset allocation.

MULTI-FACTOR MODEL FOR VALUE AND GROWTH

CRSP value and growth dimensions are defined using multiple
factors for each security. The use of these multiple factors follows
current academic thought and fund manager behavior, in that they
look at multiple data points simultaneously when generating their
investment strategies. This ultimately allows for better estimation
of the true, unobservable “value” or “growth” of a firm. 

The weights selected for each individual factor are the result
of a process designed to select investments that behave like
those “value” and “growth” managers would choose, while
limiting portfolio turnover and the obvious transaction costs
incurred. In contrast to many existing index providers,
CRSP found that not all factors are created equal. On
the value side, earnings metrics have a plurality of
the weight. For growth, historical sales trends and
analyst estimates proved most important.

TRUSTED SOLUTIONS TO MAKE SOUND INVESTMENT DECISIONS

CRSP Investable Indexes are designed to best represent designated segments of the market. Similar index products such as capitalization-based indexes and value and growth style indexes are usually separated by ‘breakpoints’. However, in reality, the styles and sizes of securities at or near breakpoints are often arbitrary, or not clear. Consequently, strictly enforcing investment rules based on breakpoints may both coerce securities into categories when they do not show strong characteristics, as well as cause additional transaction costs introduced by the traffic across the breakpoints. Further, indexes constructed with rigid breakpoints are less representative of a market and can be costly to track. The CRSP Investible Indexes mitigate these problems through its innovative banding and migration features, resulting in indexes that are representative of the market segment, reflecting the way actual money managers invest.

BANDING AND PACKETING

CRSP uses banding and packeting for its cap and style indexes. Based on test results, CRSP assigns different band sizes around breakpoints for its mega-, mid-, small- and micro-cap indexes.

Similarly, CRSP also employs bands and packeting for style transitions, requiring a security to have a clear signal before migrating it to a different cap category.

LOW TURNOVER

Banding and packeting rules ensure that indexes retain proportionate representation of securities market segments while minimizing the costly turnover by up to 50% as compared to the turnover of products based on comparable indexes.
 

TRANSITIONAL RECONSTITUTION

To better align index methodology with the investment community’s best practices, such as gradual sale or purchase of securities, and maximize cost efficiency, CRSP utilizes a five-day transitional reconstitution that moves 20% of the change in holdings each day from the current index to the new target index’s holdings as computed on ranking day.

60 YEARS OF CRSP

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ABOUT CRSP

60 years after being launched by University of Chicago Professors
James Lorie and Lawrence Fisher, CRSP continues to fill a highly
important niche within the market data industry by providing
research-quality market and index data. Since launching its initial
indexes in 1966, CRSP’s experienced and dedicated team has continued
to develop innovative products. CRSP files provide a strong foundation
for economic forecasting, stock market research, and financial analyses
to academic institutions, asset managers, consultants and government agencies.

CRSP is an affiliate of the University of Chicago Booth School of Business (Chicago Booth), which is renowned for impactful financial and economic research and for producing ideas and leaders that shape the world of business. Founded in 1898, Chicago Booth is the second-oldest business school in the world and is proud to be the first business school to:

     - Have nine Nobel Prize winners on its faculty

     - Initiate a PhD program in business (1920)

     - Offer an executive MBA degree program (1943)

     - Have permanent campuses on three continents: Asia, Europe and North America.

CRSP Investable Indexes have over $1.5 trillion dollars of tracking assets.

AN EXTENSION OF OUR CORE PRODUCTS: BRIDGING THEORY AND PRACTICE

For 60 years, CRSP has maintained the level of quality and industry standards set in the formation of CRSP. Research-quality historical U.S. market databases for common stocks, mutual funds, treasuries, REITS and indexes serve nearly 600 academic, practitioners, and government sectors in 35 countries.

Today, with a staff of nearly 90 professionals, CRSP continues its commitment to providing research data for the most rigorous tests in academic research, and in backtesting applications by practitioners. In October 2012, CRSP extended beyond its core products with the introduction of the CRSP Market Indexes. This series of transparent and investable indexes provide the foundation for new areas of research and to serve as benchmarks for investment vehicles such as ETFs.

These indexes blend advancements in academic research with industry practice in a fundamentally sound manner under the premise that an index must reflect the way that money managers actually invest. CRSP’s series of transparent and investable indexes provide the necessary foundation for the development of related research products, central to CRSP’s scholarly heritage.

CRSP’S STRONG ACADEMIC UNDERPINNINGS

CRSP’s strong academic underpinnings with Chicago Booth allow us to leverage the expertise of our faculty advisory board in the development of both the real-time indexes and the related research products.

Since the publishing of the inaugural paper in 1964, CRSP data has had profound impact on academic, commercial, and governmental research. Stand-alone, or used with other data sources, CRSP data has been cited in thousands of research papers over the past 60 years by scholars in academic, commercial, and government sectors.
 

PREEMINENT HISTORIC DATA

CRSP data is recognized as the preeminent historic database for research upon which thousands of papers and dissertations have been written, methodologies created, and backtests performed using CRSP’s cornerstone US Stock and Index Databases. NASDAQ, Arca, BATS, and ICE exchanges were added to the original data set based on the New York and American Stock Exchange universes, ensuring completeness and continued relevance of CRSP data. The original monthly-frequency database was refined to include daily data, offering more granularity and accuracy. Additional databases have been created, including US Treasuries, Mutual Funds, and REITS.
 

95 YEARS OF DATA

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The CRSP stock database exceeds 95 years of data across 16 business cycles. No other data provider can match the breadth, depth, and accuracy of CRSP historical data.

WHO ARE CRSP HISTORICAL MARKET DATA SUBSCRIBERS?

Academic
Our Academic subscribers include the leading institutions around the world. In the US, CRSP data is relied on for research and teaching at the top 280+ schools conferring PhDs, MBAs, and undergraduate degrees in math, statistics, accounting, finance, economics, and other related disciplines. Outside the US, CRSP serves more than 210 leading institutions based in 35 countries.

Commercial
Our Commercial subscribers include the leading asset management firms, including hedge funds, mutual funds, insurance, pension funds and endowments. Our historical research data is relied on for rigorous backtesting and serve as investment performance benchmarks.

Government
In the government segment, CRSP historical data is relied on by researchers in regulatory agencies, Federal Reserve Banks, and other governmental entities.
 

CRSP TIMELINE

WHY WAS 1926 SIGNIFICANT?

In early 1960, Chicago Booth Professors Lawrence Fisher and James Lorie were debating a logical starting point for the data collection that would be the inception of CRSP. They ultimately decided that the file needed to start at least one full business cycle before the 1929 stock market crash. By starting with January 30, 1926, the initial study included 35 years of data, including two complete years preceding the 1928-1929 bull market. (In 1977, the file was updated in order to make the initial date of data December 31, 1925.) 

Another major consideration for the initial date of data was the availability of complete and reliable data sources. Primary source material prior to 1930 is often incomplete or inaccurate. Moreover, as of February 16, 1926, the Consolidated Stock Exchange ceased trading. Consolidated had been the chief rival to the NYSE for many years prior to its demise. This increased the distance, in terms of volume and reputation, between NYSE and the many smaller regional exchanges.

In their book A Half Century of Returns on Stocks and Bonds, Fisher and Lorie offer this perspective on the value of historical data: 

“The reasons for covering as long a time period as we can with consistent methods should be obvious at this time. Historical data show the kinds of human experience that have taken place, and, perhaps, their relative frequencies. But each period also has its own special features. To ignore all data from the 1920s, 1930s, and early 1940s in estimating the riskiness of investments in common stock — as many did in the late 1960s — now appears to be foolhardy. Older data could be ignored safely only if risk were much better understood.”