Predictive Regressions Based on Managerial Decision Variables: Is There a Small-Sample Bias?

20 Pages Posted: 15 Dec 2011

See all articles by Malcolm P. Baker

Malcolm P. Baker

Harvard Business School; National Bureau of Economic Research (NBER)

Jeffrey Wurgler

NYU Stern School of Business; National Bureau of Economic Research (NBER)

Ryan Taliaferro

Acadian Asset Management

Multiple version iconThere are 5 versions of this paper

Date Written: December 2011

Abstract

Many studies find that aggregate managerial decision variables, such as aggregate equity issuance, predict stock or bond market returns. Recent research argues that these findings may be driven by an aggregate time-series version of Schultz’s (2003, Journal of Finance 58, 483–517) pseudo market-timing bias. Using standard simulation techniques, we find that the bias is much too small to account for the observed predictive power of the equity share in new issues, corporate investment plans, insider trading, dividend initiations, or the maturity of corporate debt issues.

Suggested Citation

Baker, Malcolm P. and Wurgler, Jeffrey A. and Taliaferro, Ryan, Predictive Regressions Based on Managerial Decision Variables: Is There a Small-Sample Bias? (December 2011). NYU Working Paper No. 2451/31360, NYU Working Paper No. FIN-11-027, Available at SSRN: https://ssrn.com/abstract=1972798

Malcolm P. Baker

Harvard Business School ( email )

Boston, MA 02163
United States
617-495-6566 (Phone)

HOME PAGE: http://www.people.hbs.edu/mbaker

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jeffrey A. Wurgler (Contact Author)

NYU Stern School of Business ( email )

Stern School of Business
44 West 4th Street, Suite 9-190
New York, NY 10012-1126
United States
212-998-0367 (Phone)
212-995-4233 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~jwurgler/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ryan Taliaferro

Acadian Asset Management ( email )

260 Franklin Street
Boston, MA 02110
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
84
Abstract Views
985
Rank
66,208
PlumX Metrics