A First Look at the Accuracy of the CRSP Mutual Fund Database and a Comparison of the CRSP and Morningstar Mutual Fund Databases

This paper examines problems in the CRSP Survivor Bias Free U.S. Mutual Fund Database ~CRSP, 1998! and compares returns contained in it to those in Morningstar. The CRSP database has an omission bias that has the same effects as survivorship bias. Although all mutual funds are listed in CRSP, return data is missing for many and the characteristics of these funds differ from the populations. The CRSP return data is biased upward and merger months are inaccurately recorded about half the time. Differences in returns in Morningstar and CRSP are a problem for older data and small funds. IN RECENT YEARS, THERE HAS BEEN an enormous increase in the number of mutual fund studies. There is hardly a professional meeting without at least one session devoted to the topic. One of the major driving forces behind this increase in research is the availability of large computer-readable databases on fund characteristics and fund returns. The most widely used mutual fund databases in recent studies are those provided by the Center for Research in Security Prices ~CRSP! and Morningstar.1 Whereas Morningstar has provided mutual fund data for some time, the CRSP mutual fund database is more recent. CRSP has constructed a mutual fund database that is likely to challenge Morningstar’s as the source of fund data for academic research. Despite the excellent job that was done in constructing the CRSP mutual fund database, like any new database, it is not free of errors. The purpose of this article is to examine the potential errors in the CRSP database and to compare the CRSP return data with Morningstar return data. It is particularly appropriate for us to do so, since we constructed the first survivorship-bias-free databases of mutual fund monthly returns, and thus we have a data set that we can compare to the CRSP database.2 * Elton and Gruber are from New York University. Blake is from Fordham University. 1 For example, Chevalier and Ellison ~1999!, Blake and Morey ~2000!, and Chen and Pennacchi ~2000! use Morningstar as a database whereas Zheng ~1999! and Wermers ~2000! use CRSP. 2 See Elton et al. ~1993!, Blake, Elton, and Gruber ~1993! and Elton, Gruber, and Blake ~1996a!. The latter articles construct a database that is particularly appropriate to compare with the CRSP database. THE JOURNAL OF FINANCE • VOL. LVI, NO. 6 • DEC. 2001