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Evidence of excess returns on firms that issue or repurchase equity

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  • William R. Nelson

Abstract

Between 1927 and 1992, portfolios of the stock of the 5 percent of firms with the lowest annual growth in shares outstanding (generally a reduction in shares outstanding) posted 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 annual growth 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.

Suggested Citation

  • William R. Nelson, 1999. "Evidence of excess returns on firms that issue or repurchase equity," Finance and Economics Discussion Series 1999-06, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:1999-06
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    References listed on IDEAS

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    Cited by:

    1. William R. Nelson, 1999. "Why does the change in shares predict stock returns?," Finance and Economics Discussion Series 1999-07, Board of Governors of the Federal Reserve System (U.S.).
    2. William R. Nelson, 1999. "The aggregate change in shares and the level of stock prices," Finance and Economics Discussion Series 1999-08, Board of Governors of the Federal Reserve System (U.S.).

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