I understand why we might want to exclude preliminary data for sims.
But I do not fully understand any possible advantages to excluding preliminary data for PORTs.
Obviously there cannot be a PIT problem for ports.
So there is the problem that the information could get revised later (still not a PIT problem for a port).
In addition, I believe Marco has mentioned that there may be problems with NAs. I do not understand how using preliminary data creates NAs.
Could someone please expand on how this may create more NAs. Also please explain any other possible advantages to excluding preliminary data in ports.
I went ahead and funded a port today (using preliminary data) so the is not just a theoretical concern. I am wondering whether I should continue to use preliminary data next week or whether I might want to change this.
In addition to any details, any recommendations or personal preferences would be appreciated.
There are two minor disadvantages to Use Prelims for live strategies.
You’ll probably get a few more NAs in certain functions. It might also negatively impact the value of BeneishMScore and PiotFScore. The reason Use Prelims will create more NAs is as follows. Companies often announce only a small amount of data in their preliminary announcements. They’ll often announce only the income statement and not the balance sheet or cash flow statement. For almost all line items, if the preliminary announcement is NA we automatically fall back to the previous final statements for our figures. But there are some line items where that doesn’t happen, for a variety of complicated reasons. This has always been the case–it’s not new behavior. One way to explore this is to create a screen with CompleteStmt = 0. List a number of important line items using ShowVar. Then try Use Prelims and Exclude Prelims and compare the number of NAs you get with the former.
Because many companies do not issue cash flow and balance sheet statements in preliminary announcements, once the final statement has been released, your ranking position will change if it’s dependent on those items. So Exclude Prelims will mean lower turnover. For example, let’s say the accrual ratio–(NetInc - OperCashFl)/AstTot–plays a significant part in your screen or ranking system. A company announces its net income and then four weeks later files a statement that includes its operating cash flow and total assets. If you use prelims, your accrual ratio for that four-week interval will be very different from what it was before the announcement and what it will be after the final statement.
If neither of those disadvantages bother you too much, I would recommend Use Prelims for live strategies.
Yuvol - I haven’t really been following this issue (prelim data). I wasn’t aware that Factset supported preliminary data. In any case, how does one turn on or off prelim data? I want it off always but I would like to know where the control is.
Each screen (settings tab), simulation (general tab), and ranking system (performance tab, rank tab) has “PIT Method - Prelim” and a Use or Exclude option. We are working to get this functionality in place for the fundamental charts too.