Evaluating Value Weighting: Corporate Events and Market Timing / Owen A. Lamont.

Format:

Book

Author/Creator:

Lamont, Owen A.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9049.

NBER working paper series no. w9049

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Evaluating Value Weighting

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

Corporate events, such as new issues and new lists, appear in waves. These waves imply that the market portfolio has a time-varying weight in new lists, and one can decompose the market return into a fixed weight return plus a timing return. Most of the reduction in aggregate market returns caused by holding new lists comes from timing, not from average underperformance. When new lists are a high fraction of the market, subsequent returns for both new and old lists are low. A mean variance optimizing investor holding the market would be better off replacing holdings of new lists with old lists, t-bills, or even currency stuffed in a mattress.

Notes:

Print version record

July 2002.