CUSIP: 6, 8 or 9 characters?

A user recently inquired whether Eventus would produce different results depending on whether the request file contained 6- versus 8-character CUSIP values. Many users have asked similar and related questions about CUSIP length over the years.

To answer the user's question, the abnormal returns for any one security will not be different, but the securities included in the sample could differ when using 6- versus 8-character CUSIPs.

To explain this in detail, it helps to start with a little background, CUSIP, which is controlled by Standard & Poor's, is officially a 9-character string. The first 6 identify the issuer, the 7th and 8th identify the issue and the 9th is a check digit that is fully determined by the first 8 characters. CRSP (the default data source for Eventus on WRDS and, when subscribed and installed, for Eventus for Windows and Linux) omits the check digit and uses an 8-character CUSIP field. Common equity issues always have an 8th character of 0. As CRSP covers only common stocks, all CUSIPs in CRSP end in 0 as the 8th character. CUSIPs from other sources that have a non-zero digit in the 8th position are not common stock CUSIPs.

Given the above-described structure, we can see that eight characters are required to uniquely identify a security. Eventus accepts request files containing either 6-character or 8-character CUSIPs (but not a mixture of both in the same request file). In some cases, the same corporation may have only sequentially different issues in CRSP. For example, a corporate name change sometimes triggers a change of CUSIP. A legal reorganization may cause the retirement of the old common stock and the distribution of a new stock issue with a different CUSIP. Because Eventus takes the requested date into account, purely sequential multiple issues in CRSP are not problematic with respect to using 6-character CUSIPs and Eventus will find the issue that is actually trading on the requested date.

In other cases, using 6-character CUSIPs can produce matches that you may or may not be expecting. For example, if an issuer has two publicly traded classes of common stock outstanding on the request file date, the 6-character CUSIP, which identifies only the issuer, is likely to match both classes, potentially increasing the sample size. Please check the information at the top of the Eventus output file to see a report of the sample composition relative to the number of request file lines.

CRSP above refers to the most excellent CRSP Stock database offered by the Center for Research in Security Prices of the Booth School of Business, University of Chicago. Eventus, a product of Cowan Research LC, is the world's first and still foremost software for implementing a broad class of academic research methods known as event studies and includes additional tools for working with CRSP Stock data. Eventus can use data from any source.