Are there advantages to using CRSP's PERMNO instead of CUSIP number?

There are three situations that can cause missed links or mismatches when using CUSIPs from different sources:

1. CUSIPs can change over time for a security due to name changes or capital changes. If a database only contains the most recent CUSIP, or reassigns CUSIPs after trading stops, a backtesting universe identified by CUSIP will continue to drop links to the security data over time.

2. CUSIP allows a mechanism for third-parties to assign an unofficial CUSIP for a security otherwise unassigned. These CUSIPs contain a 9 in the 4th and 5th and/or 7th digit. If different third-parties select a different dummy CUSIP, the link between them can be missed or wrong. This is only an issue before 1968, before CUSIP existed, or in a few cases where foreign issues on US exchanges were assigned ISIN but never CUSIP.

3. CUSIP provides for the possibility of reusing a CUSIP, or equivalently, it may continue a CUSIP after a corporate event that could be considered significant enough to produce a new company or issue.

There is only one known case, PepsiAmericas in 2000 and 2001, when this occurred. CRSP's name history for a security tracks changes in its CUSIP number, accessible by the unique identifier, PERMNO. On CRSP, a PERMNO can be associated with more than one eight-digit CUSIP number over time, but an eight-digit CUSIP number can only be associated with one PERMNO. CRSP never changes or drops CUSIPs that were ever active, so backtesting universes identified by CUSIP always link to the correct data. In the third situation mentioned above, CRSP will assign a dummy CUSIP to the older security to preserve the uniqueness of CUSIP to PERMNO.