recently I am doing cross sectional regressions, and getting confused about missing returns.
Suppose we have 100 stocks, then we want to construct a value weighted return (or equal weighted return). But the point is that the weights should be created in t-1 since we shouldn't use information which are not revealed to investors. But firm "A Corp" may have missing return for period t, then it has return record afterwards. Do we simply drop the return of "A Corp" for period t then rebalance our weights for the rest 99 firms? If we do rebalance the weights, it simply implies that investors are using the fact "A Corp" will have missing returns, which should not be revealed to the investors in t-1. If we do not rebalance the weights, then it is equivalent to impose that we have zero return for "A Corp".
How do guys you deal with missing returns in this case? Many thanks!!