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- Publisher Website: 10.1111/0022-1082.165353
- Scopus: eid_2-s2.0-0041182406
- WOS: WOS:000071994700016
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Article: Caveat compounder: A warning about using the daily CRSP equal-weighted index to compute long-run excess returns
Title | Caveat compounder: A warning about using the daily CRSP equal-weighted index to compute long-run excess returns |
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Authors | |
Issue Date | 1998 |
Citation | Journal of Finance, 1998, v. 53, n. 1, p. 403-416 How to Cite? |
Abstract | This paper issues a warning that compounding daily returns of the Center for Research in Security Prices (CRSP) equal-weighted index can lead to surprisingly large biases. The differences between the monthly returns compounded from the daily tapes and the monthly CRSP equal-weighted indices is almost 0.43 percent per month, or 6 percent per year. This difference amounts to one-third of the average monthly return, and is large enough to reverse the conclusions of a paper using the daily tape to compute the return on the benchmark portfolio. We also investigate the sources of these biases and suggest several alternative strategies to avoid them. |
Persistent Identifier | http://hdl.handle.net/10722/326030 |
ISSN | 2023 Impact Factor: 7.6 2023 SCImago Journal Rankings: 19.139 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Canina, Linda | - |
dc.contributor.author | Michaely, Roni | - |
dc.contributor.author | Thaler, Richard | - |
dc.contributor.author | Womack, Kent | - |
dc.date.accessioned | 2023-03-09T09:57:31Z | - |
dc.date.available | 2023-03-09T09:57:31Z | - |
dc.date.issued | 1998 | - |
dc.identifier.citation | Journal of Finance, 1998, v. 53, n. 1, p. 403-416 | - |
dc.identifier.issn | 0022-1082 | - |
dc.identifier.uri | http://hdl.handle.net/10722/326030 | - |
dc.description.abstract | This paper issues a warning that compounding daily returns of the Center for Research in Security Prices (CRSP) equal-weighted index can lead to surprisingly large biases. The differences between the monthly returns compounded from the daily tapes and the monthly CRSP equal-weighted indices is almost 0.43 percent per month, or 6 percent per year. This difference amounts to one-third of the average monthly return, and is large enough to reverse the conclusions of a paper using the daily tape to compute the return on the benchmark portfolio. We also investigate the sources of these biases and suggest several alternative strategies to avoid them. | - |
dc.language | eng | - |
dc.relation.ispartof | Journal of Finance | - |
dc.title | Caveat compounder: A warning about using the daily CRSP equal-weighted index to compute long-run excess returns | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1111/0022-1082.165353 | - |
dc.identifier.scopus | eid_2-s2.0-0041182406 | - |
dc.identifier.volume | 53 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 403 | - |
dc.identifier.epage | 416 | - |
dc.identifier.isi | WOS:000071994700016 | - |