TY  - JOUR
AU  - Lamont,Owen A.
TI  - Evaluating Value Weighting: Corporate Events and Market Timing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9049
PY  - 2002
Y2  - July 2002
UR  - http://www.nber.org/papers/w9049
L1  - http://www.nber.org/papers/w9049.pdf
N1  - Author contact info:
Owen Lamont
Department of Economics
Harvard University
Cambridge MA 02138
E-Mail: owen.lamont@yale.edu
AB  - 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.
ER  -