NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Evaluating Value Weighting: Corporate Events and Market Timing

Owen A. Lamont

NBER Working Paper No. 9049
Issued in July 2002
NBER Program(s):   AP   CF

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.

download in pdf format
   (476 K)

email paper

This paper is available as PDF (476 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9049

Users who downloaded this paper also downloaded these:
Lamont, Polk, and Saa-Requejo w6210 Financial Constraints and Stock Returns
Bolton, Chen, and Wang w16808 Market Timing, Investment, and Risk Management
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us