Can Managers Forecast Aggregate Market Returns?
Article first published online: 2 MAR 2005
The Journal of Finance
Volume 60, Issue 2, pages 963–986, April 2005
How to Cite
BUTLER, A. W., GRULLON, G. and WESTON, J. P. (2005), Can Managers Forecast Aggregate Market Returns?. The Journal of Finance, 60: 963–986. doi: 10.1111/j.1540-6261.2005.00752.x
- Issue published online: 2 MAR 2005
- Article first published online: 2 MAR 2005
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.