Equity Valuation and Portfolio Management

APPENDIX: THE COMPUSTAT POINT-IN-TIME, IBES CONSENSUS DATABASES AND FACTOR DEFINITIONS

The factors used in this chapter and Chapter 11 were constructed on a monthly basis with data from the Compustat Point-In-Time and IBES Consensus databases. Our sample includes all stocks contained in the Russell 1000 index over the period December 31, 1989, to December 31, 2008.

The Compustat Point-In-Time database⁴⁵ contains quarterly financial data from the income, balance sheet, and cash flow statements for active and inactive companies. This database provides a consistent view of historical financial data, both reported data and subsequent restatements, the way it appeared at the end of any month. Using this data allows the researcher to avoid common data issues such as survivorship and look-ahead bias. The data is available from March 1987.

The Institutional Brokers Estimate System (IBES) database⁴⁶ provides actual earnings from companies and estimates of various financial measures from sell-side analysts. The estimated financial measures include estimates of earnings, revenue and sales, operating profit, analyst recommendations, and other measures. The data is offered on a summary (consensus) level or detailed (analyst-by-analyst) basis. The U.S. data covers reported earnings estimates and results since January 1976.

The factors used in this chapter and the prior one are defined as follows.⁴⁷

Value Factors

Operating income before depreciation to enterprise value = EBITDA/EV

where

and ...