We use differences between the attributes of stock issuers and repurchasers to forecast characteristic-related stock returns. For example, we show that large firms underperform following years when issuing firms are large relative to repurchasing firms. Our approach is useful for forecasting returns to portfolios based on book-to-market (HML), size (SMB), price, distress, payout policy, profitability, and industry. We consider interpretations of these results based on both time-varying risk premia and mispricing. Our results are primarily consistent with the view that firms issue and repurchase shares to exploit time-varying characteristic mispricing.
Document Object Identifier (DOI): 10.3386/w15948
Published: Greenwood, Robin, and Samuel G. Hanson. "Share Issuance and Factor Timing." Journal of Finance 67, no. 2 (April 2012): 761–798.
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