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dc.contributor.authorCanina, Linda
dc.contributor.authorMichaely, Roni
dc.contributor.authorThaler, Richard
dc.contributor.authorWomack, Kent
dc.date.accessioned2020-09-12T21:03:04Z
dc.date.available2020-09-12T21:03:04Z
dc.date.issued1998-02-01
dc.identifier.other9841863
dc.identifier.urihttps://hdl.handle.net/1813/71485
dc.description.abstractThis 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.isoen_US
dc.rightsRequired Publisher Statement: © Wiley. Final version published as: Canina, L., Michaely, R., Thaler, R., & Womack, K. (1998). Caveat compounder: A warning about using the daily CRSP equal-weighted index to compute long-run excess returns. The Journal of Finance, 53(1). 403–416. doi:10.1111/0022-1082.165353 Reprinted with permission. All rights reserved.
dc.subjectcompounding daily returns
dc.subjectCenter for Research in Security Prices (CRSP)
dc.subjectvalue-weighted (VW) index portfolio
dc.subjectmonthly indices
dc.titleCaveat Compounder: A Warning about Using the Daily CRSP Equal-Weighted Index to Compute Long-Run Excess Returns
dc.typearticle
dc.relation.doihttps://doi.org/10.1111/0022-1082.165353
dc.description.legacydownloadsCanina30_Caveat_compounder.pdf: 661 downloads, before Aug. 1, 2020.
local.authorAffiliationCanina, Linda: lc29@cornell.edu Cornell University School of Hotel Administration
local.authorAffiliationMichaely, Roni: Cornell University
local.authorAffiliationThaler, Richard: University of Chicago
local.authorAffiliationWomack, Kent: Dartmouth College


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