Keywords: Equity issuance, equity repurchase, excess returns
Abstract: Between 1927 and 1992, portfolios of the stock of the 5 percent of firms with
the lowest annual change in shares experienced returns over the subsequent
five years that averaged 12 percentage points more per year than the returns
to portfolios of the 5 percent of firms with the highest change in shares.
The difference in returns is greater in more recent years and was positive
for all of the final 33 years of the sample. The difference is apparent for
portfolios of firms of all sizes and industries. The market beta of the
returns to the portfolios of repurchasers exceeds only slightly that of the
returns to the portfolios of issuers, insufficiently to account for more than
a small part of the difference in average returns.
Full paper (185 KB PDF)
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Last update: March 17, 1999