Working Paper: NBER ID: w9049
Authors: Owen A. Lamont
Abstract: 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.
Keywords: No keywords provided
JEL Codes: G14; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| new lists (Y10) | market returns (G19) |
| timing of new lists (G14) | market returns (G19) |
| market portfolio composition (G10) | investor returns (G11) |
| investment strategy (G11) | returns (Y60) |
| new lists high fraction (Y10) | subsequent returns low (G17) |