Errors in recorded security prices and the turn-of-the year effect

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exhibit more factor-related seasonality during the TOY period than do the
small-firm portfolios.

IV. The Data

The data used in the tests of the LPSH are from the 1982 versions of the
Center for Research in Security Prices (CRSP) daily returns file, daily index
file, monthly master file, and AHEX master file. The sample consists of daily
stock returns of all firms listed on the CRSP daily returns file from July
1962 through December 1982. The firms are grouped into portfolios on the
first trading day of July on the basis of market capitalization and on the
basis of stock price on the last trading day in June (in every year but
1962). To disentangle the effects of grouping from the TOY effect, we utilize
a July-to-June year, rather than a January-to-December year. All firms in the
sample in a given year were listed on the CRSP daily return file and had price
and share information on the CRSP monthly master file or AMEX master file on
the last trading day in June (in every year but 1962). The portfolios are
updated each July to capture new listings. Firms delisted during the sample
period are treated as liquidations. We assume that stockholders receive the
full market value of their shares and invest the proceeds in the risk-free
asset (the weekly Treasury bill rate is used to proxy for the return on the
risk-free asset).' The delisted firm is dropped from the sample when the
portfolios are updated at the beginning of the next sample (July to June) year.

The portfolios are equally weighted at the beginning of each sample year
and are not rebalanced until the portfolios are updated at the beginning of
the next sample year. The portfolios are set up as mutual funds, in which
the portfolio weights are adjusted to reflect the firms' performance in the
portfolio relative to that of the portfolio. That is, the portfolio weight of

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