Age Matters

44 Pages Posted: 29 May 2019

See all articles by Danqiao Guo

Danqiao Guo

University of Waterloo

Phelim P. Boyle

Wilfrid Laurier University - School of Business & Economics; University of Waterloo

Chengguo Weng

University of Waterloo

Tony S. Wirjanto

University of Waterloo - School of Accounting and Finance; University of Waterloo, Department of Statistics & Actuarial Science

Date Written: April 11, 2019

Abstract

This paper starts from examining the performance of equally weighted 1/N stock portfolios over time. During the last four decades these portfolios outperformed the market. The construction of these portfolios implies that their constituent stocks are in general older than those in the market as a whole. We show that the differential performance can be explained by the relation between stock returns and firm age. We document a significant relation between age and returns. Since 1977 stock returns have been an increasing function of age apart from the oldest ages. For this period the age effect completely dominates the size effect.

Keywords: Bootstrapped portfolio, rebalanced portfolio, age effect, size effect

JEL Classification: G10, G11

Suggested Citation

Guo, Danqiao and Boyle, Phelim P. and Weng, Chengguo and Wirjanto, Tony S., Age Matters (April 11, 2019). Available at SSRN: https://ssrn.com/abstract=3363360 or http://dx.doi.org/10.2139/ssrn.3363360

Danqiao Guo (Contact Author)

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

Phelim P. Boyle

Wilfrid Laurier University - School of Business & Economics ( email )

Waterloo, Ontario N2L 3C5
Canada
519 884 1970 (Phone)
519 888 1015 (Fax)

University of Waterloo

Waterloo, Ontario N2L 3G1
Canada

Chengguo Weng

University of Waterloo ( email )

M3-200 Univ Ave W
Waterloo, Ontario N2L3G1
Canada
(1)888-4567 ext.31132 (Phone)

Tony S. Wirjanto

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)

HOME PAGE: http://https://uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

University of Waterloo, Department of Statistics & Actuarial Science ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada
519-888-4567 x35210 (Phone)
519-746-1875 (Fax)

HOME PAGE: http://math.uwaterloo.ca/statistics-and-actuarial-science/people-profiles/tony-wirjanto

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