Can Managers Forecast Aggregate Market Returns?

Can Managers Forecast Aggregate Market Returns? ABSTRACT Previous studies have found that the proportion of equity in total new debt and equity issues is negatively correlated with future equity market returns. Researchers have interpreted this finding as evidence that corporate managers are able to predict the systematic component of their stock returns and to issue equity when the market is overvalued. In this article we show that the predictive power of the share of equity in total new issues stems from pseudo‐market timing and not from any abnormal ability of managers to time the equity markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Can Managers Forecast Aggregate Market Returns?

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Abstract

ABSTRACT Previous studies have found that the proportion of equity in total new debt and equity issues is negatively correlated with future equity market returns. Researchers have interpreted this finding as evidence that corporate managers are able to predict the systematic component of their stock returns and to issue equity when the market is overvalued. In this article we show that the predictive power of the share of equity in total new issues stems from pseudo‐market timing and not from any abnormal ability of managers to time the equity markets.

Journal

The Journal of FinanceWiley

Published: Apr 1, 2005

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