TY  - JOUR
AU  - Baker,Malcolm P.
AU  - Taliaferro,Ryan
AU  - Wurgler,Jeffrey
TI  - Pseudo Market Timing and Predictive Regressions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10823
PY  - 2004
Y2  - October 2004
UR  - http://www.nber.org/papers/w10823
L1  - http://www.nber.org/papers/w10823.pdf
N1  - Author contact info:
Malcolm Baker
Baker Library 261
Harvard Business School
Soldiers Field
Boston, MA  02163
Tel: 617/495-6566
Fax: 617/496-5271
E-Mail: mbaker@hbs.edu

Jeffrey Wurgler
Stern School of Business, Suite 9-190
New York University
44 West 4th Street
New York, NY  10012
Tel: 212/998-0367
Fax: 212/995-4233
E-Mail: jwurgler@stern.nyu.edu
AB  - A number of studies claim that aggregate managerial decision variables, such as aggregate equity issuance, have power to predict stock or bond market returns. Recent research argues that these results may be driven by an aggregate time-series version of Schultz's (2003) pseudo market timing bias. We use standard simulation techniques to estimate the size of the aggregate pseudo market timing bias for a variety of predictive regressions based on managerial decision variables. We find that the bias can explain only about one percent of the predictive power of the equity share in new issues, and that it is also much too small to overturn prior inferences about the predictive power of corporate investment plans, insider trading, dividend initiations, or the maturity of corporate debt issues.
ER  -